Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Form 10-Q
(Mark One)
x☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended October 31, 20172020
OR
¨☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For transition period from to
Commission File Number: 001-35680
Workday, Inc.
WORKDAY, INC.
(Exact name of registrant as specified in its charter)
Delaware20-2480422
(State or other jurisdiction of

incorporation or organization)
(IRSI.R.S Employer

Identification No.)
62306110 Stoneridge Mall Road
Pleasanton, California 94588
(Address of principal executive offices)
Telephone Number (925) 951-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001WDAYThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  x☒ No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x☒  No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large“large accelerated filer”, “accelerated filer, accelerated filer, smaller” “smaller reporting company,” and emerging“emerging growth companycompany” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
☐		Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐  No  x☒
As of October 31, 2017,November 18, 2020, there were approximately 210180 million shares of the registrant’s Class A common stock, net of treasury stock, and 60 million shares of the registrant's Class B common stock outstanding.

Table of Contents
Workday, Inc.
Page No.
PART I. FINANCIAL INFORMATION
Item 1.

Workday, Inc.
Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets as of October 31, 20172020 and January 31, 20172020
3
4
5
6
67
89
Item 2.
2728
Item 3.
4041
Item 4.
4142
PART II. OTHER INFORMATION
Item 1.
4243
Item 1A.
4344
Item 2.
5967
Item 3.6.
5968
Item 4.
5969
Item 5.
Other Information
59
Item 6.
Exhibits
60
Signatures
61
Exhibit Index
62

2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
October 31, 2020January 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,067,038 $731,141 
Marketable securities1,880,772 1,213,432 
Trade and other receivables, net742,744 877,578 
Deferred costs110,024 100,459 
Prepaid expenses and other current assets157,664 172,012 
Total current assets3,958,242 3,094,622 
Property and equipment, net976,610 936,179 
Operating lease right-of-use assets415,547 290,902 
Deferred costs, noncurrent232,413 222,395 
Acquisition-related intangible assets, net262,603 308,401 
Goodwill1,819,625 1,819,261 
Other assets179,987 144,605 
Total assets$7,845,027 $6,816,365 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$54,949 $57,556 
Accrued expenses and other current liabilities129,794 130,050 
Accrued compensation264,443 248,154 
Unearned revenue2,000,417 2,223,178 
Operating lease liabilities84,552 66,147 
Debt, current1,091,050 244,319 
Total current liabilities3,625,205 2,969,404 
Debt, noncurrent701,178 1,017,967 
Unearned revenue, noncurrent68,874 86,025 
Operating lease liabilities, noncurrent352,900 241,425 
Other liabilities18,816 14,993 
Total liabilities4,766,973 4,329,814 
Stockholders’ equity:
Common stock240 231 
Additional paid-in capital6,184,070 5,090,187 
Treasury stock(269,083)0 
Accumulated other comprehensive income (loss)1,110 23,492 
Accumulated deficit(2,838,283)(2,627,359)
Total stockholders’ equity3,078,054 2,486,551 
Total liabilities and stockholders’ equity$7,845,027 $6,816,365 
 October 31, 2017 January 31, 2017
  *As Adjusted
Assets   
Current assets:   
Cash and cash equivalents$1,336,984
 $539,923
Marketable securities1,874,139
 1,456,822
Trade and other receivables, net349,309
 409,780
Deferred costs56,304
 51,330
Prepaid expenses and other current assets77,036
 66,590
Total current assets3,693,772
 2,524,445
Property and equipment, net487,234
 365,877
Deferred costs, noncurrent120,173
 117,249
Acquisition-related intangible assets, net34,305
 48,787
Goodwill158,418
 158,354
Other assets70,814
 53,570
Total assets$4,564,716
 $3,268,282
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$35,837
 $26,824
Accrued expenses and other current liabilities108,074
 61,582
Accrued compensation139,668
 110,625
Unearned revenue1,129,031
 1,086,212
Current portion of convertible senior notes, net336,936
 —
Total current liabilities1,749,546
 1,285,243
Convertible senior notes, net1,136,494
 534,423
Unearned revenue, noncurrent100,135
 135,331
Other liabilities38,267
 36,677
Total liabilities3,024,442
 1,991,674
Stockholders’ equity:   
Common stock210
 202
Additional paid-in capital3,195,130
 2,681,200
Accumulated other comprehensive income (loss)(16,310) 2,071
Accumulated deficit(1,638,756) (1,406,865)
Total stockholders’ equity1,540,274
 1,276,608
Total liabilities and stockholders’ equity$4,564,716
 $3,268,282
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
3

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Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Revenues:
Subscription services$968,547 $798,516 $2,782,201 $2,256,695 
Professional services137,413 139,584 404,111 394,212 
Total revenues1,105,960 938,100 3,186,312 2,650,907 
Costs and expenses (1):
Costs of subscription services152,396 122,305 442,666 355,935 
Costs of professional services142,785 148,625 442,422 424,548 
Product development419,962 401,742 1,282,127 1,127,695 
Sales and marketing302,870 286,794 897,924 839,930 
General and administrative102,024 88,884 296,461 258,932 
Total costs and expenses1,120,037 1,048,350 3,361,600 3,007,040 
Operating income (loss)(14,077)(110,250)(175,288)(356,133)
Other income (expense), net(8,846)(4,136)(31,272)2,899 
Loss before provision for (benefit from) income taxes(22,923)(114,386)(206,560)(353,234)
Provision for (benefit from) income taxes1,417 1,343 4,164 (518)
Net loss$(24,340)$(115,729)$(210,724)$(352,716)
Net loss per share, basic and diluted$(0.10)$(0.51)$(0.89)$(1.56)
Weighted-average shares used to compute net loss per share, basic and diluted238,059 228,461 235,685 226,071 
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Revenues:       
Subscription services$463,568
 $337,910
 $1,297,831
 $924,148
Professional services91,821
 75,612
 262,739
 210,708
Total revenues555,389
 413,522
 1,560,570
 1,134,856
Costs and expenses (1):
       
Costs of subscription services71,898
 54,645
 197,627
 155,224
Costs of professional services91,657
 72,240
 260,834
 198,140
Product development239,588
 185,311
 657,130
 488,975
Sales and marketing176,121
 149,537
 503,782
 412,055
General and administrative56,184
 57,721
 163,085
 144,609
Total costs and expenses635,448
 519,454
 1,782,458
 1,399,003
Operating loss(80,059) (105,932) (221,888) (264,147)
Other income (expense), net(3,742) (3,105) (4,467) (30,136)
Loss before provision for (benefit from) income taxes(83,801) (109,037) (226,355) (294,283)
Provision for (benefit from) income taxes1,745
 1,077
 5,767
 2,147
Net loss$(85,546) $(110,114) $(232,122) $(296,430)
Net loss per share, basic and diluted$(0.41) $(0.55) $(1.12) $(1.50)
Weighted-average shares used to compute net loss per share, basic and diluted209,188
 199,479
 206,715
 197,093
(1) Costs and expenses include share-based compensation expenses as follows:
Costs of subscription services$16,767 $13,634 $45,484 $36,050 
Costs of professional services27,349 22,249 74,467 57,390 
Product development128,423 118,215 378,950 315,210 
Sales and marketing54,077 47,142 150,881 128,686 
General and administrative33,216 29,762 97,958 88,122 
(1)      Costs and expenses include share-based compensation expenses as follows:
    
Costs of subscription services$6,899
 $5,472
 $19,170
 $14,837
Costs of professional services9,956
 7,436
 27,278
 18,698
Product development59,116
 45,968
 167,068
 117,250
Sales and marketing25,517
 22,597
 74,618
 62,443
General and administrative20,991
 24,982
 63,656
 59,684
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
4

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Workday, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Net loss$(24,340)$(115,729)$(210,724)$(352,716)
Other comprehensive (loss) income, net of tax:
Net change in foreign currency translation adjustment(2)173 435 (420)
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision of $0, $444, $0, and $875, respectively(2,578)1,194 (332)2,786 
Net change in market value of effective foreign currency forward exchange contracts, net of tax provision of $0, $(1,315), $0, and $3,295, respectively3,044 (9,206)(22,485)23,062 
Other comprehensive (loss) income, net of tax464 (7,839)(22,382)25,428 
Comprehensive loss$(23,876)$(123,568)$(233,106)$(327,288)
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Net loss$(85,546) $(110,114) $(232,122) $(296,430)
Other comprehensive income (loss), net of tax:       
Net change in foreign currency translation adjustment(504) (322) 462
 111
Net change in unrealized gains (losses) on available-for-sale investments(302) (392) (931) 542
Net change in market value of effective foreign currency forward exchange contracts6,693
 5,924
 (17,912) 1,170
Other comprehensive income (loss), net of tax5,887
 5,210
 (18,381) 1,823
Comprehensive loss$(79,659) $(104,904) $(250,503) $(294,607)
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
5

Table of Contents

Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Common stock:
Balance, beginning of period$238 $227 $231 $221 
Issuance of common stock under employee equity plans2 2 7 8 
Settlement of convertible senior notes— — 2 — 
Balance, end of period240 229 240 229 
Additional paid-in capital:
Balance, beginning of period5,954,738 4,561,272 5,090,187 4,105,334 
Issuance of common stock under employee equity plans3,648 1,778 78,160 63,312 
Share-based compensation259,802 230,682 746,643 624,705 
Settlement of warrants(34,118)— (34,118)— 
Exercise of convertible senior notes hedges— — 303,202 — 
Settlement of convertible senior notes— — (4)— 
Cumulative-effect of accounting changes— — — 381 
Balance, end of period6,184,070 4,793,732 6,184,070 4,793,732 
Treasury stock:
Balance, beginning of period(303,201)0 0 0 
Exercise of convertible senior notes hedges— — (303,201)— 
Settlement of warrants34,118 — 34,118 — 
Balance, end of period(269,083)0 (269,083)0 
Accumulated other comprehensive income (loss):
Balance, beginning of period646 32,458 23,492 (809)
Other comprehensive (loss) income464 (7,839)(22,382)25,428 
Balance, end of period1,110 24,619 1,110 24,619 
Accumulated deficit:
Balance, beginning of period(2,813,943)(2,383,672)(2,627,359)(2,146,304)
Net loss(24,340)(115,729)(210,724)(352,716)
Cumulative-effect of accounting changes— — (200)(381)
Balance, end of period(2,838,283)(2,499,401)(2,838,283)(2,499,401)
Total stockholders’ equity$3,078,054 $2,319,179 $3,078,054 $2,319,179 

Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Common stock (in shares):
Balance, beginning of period237,160,715 227,607,594 231,708,391 222,052,063 
Issuance of common stock under employee equity plans1,935,725 1,931,916 7,388,498 7,487,250 
Settlement of warrants(186,202)— (186,202)— 
Settlement of convertible senior notes— 20 1,654,308 217 
Purchase of treasury stock from the exercise of convertible senior notes hedges— — (1,654,757)— 
Balance, end of period238,910,238 229,539,530 238,910,238 229,539,530 
See Notes to Condensed Consolidated Financial Statements
6
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Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
Three Months Ended October 31, Nine Months Ended October 31,2020201920202019
2017 2016 2017 2016
 *As Adjusted *As Adjusted
Cash flows from operating activities       
Cash flows from operating activities:Cash flows from operating activities:
Net loss$(85,546) $(110,114) $(232,122) $(296,430)Net loss$(24,340)$(115,729)$(210,724)$(352,716)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization34,982
 30,453
 102,380
 83,239
Depreciation and amortization73,864 72,233 218,556 201,152 
Share-based compensation expenses122,479
 100,098
 351,790
 266,555
Share-based compensation expenses259,832 231,002 747,740 625,149 
Amortization of deferred costs14,519
 11,561
 42,165
 32,917
Amortization of deferred costs28,732 23,015 82,141 65,897 
Amortization of debt discount and issuance costs12,257
 6,782
 25,992
 20,071
Amortization of debt discount and issuance costs12,098 13,512 41,466 39,400 
Gain on sale of cost method investment(194) —
 (720) (65)
Impairment of cost method investment100
 —
 100
 15,000
Non-cash lease expenseNon-cash lease expense22,141 17,081 60,389 49,155 
Other(1,294) 78
 3,317
 1,678
Other(8,760)2,744 8,040 (8,953)
Changes in operating assets and liabilities, net of business combinations:       Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net19,070
 (20,693) 59,463
 25,289
Trade and other receivables, net(53,923)2,197 127,663 86,139 
Deferred costs(19,245) (13,040) (50,063) (41,807)Deferred costs(41,823)(34,415)(101,724)(81,107)
Prepaid expenses and other assets(11,355) (3,686) (23,373) (11,368)Prepaid expenses and other assets25,898 7,463 36,738 677 
Accounts payable(7,383) 2,260
 2,830
 2,080
Accounts payable3,762 1,938 (9,313)4,488 
Accrued expenses and other liabilities59,171
 30,591
 49,788
 29,619
Accrued expenses and other liabilities(5,037)41,716 (46,378)6,595 
Unearned revenue6,470
 37,266
 7,632
 114,117
Unearned revenue1,358 (4,755)(239,899)(68,392)
Net cash provided by (used in) operating activities144,031
 71,556
 339,179
 240,895
Net cash provided by (used in) operating activities293,802 258,002 714,695 567,484 
Cash flows from investing activities       
Cash flows from investing activities:Cash flows from investing activities:
Purchases of marketable securities(930,783) (380,620) (1,829,231) (1,571,756)Purchases of marketable securities(806,713)(375,144)(1,963,244)(1,429,046)
Maturities of marketable securities372,389
 449,592
 1,185,730
 1,614,495
Maturities of marketable securities427,910 494,023 1,282,324 1,339,830 
Sales of available-for-sale securities32,886
 63,340
 222,823
 92,192
Business combinations, net of cash acquired—
 (144,209) —
 (147,879)
Sales of marketable securitiesSales of marketable securities0 0 5,279 55,499 
Owned real estate projects(27,616) (59,705) (80,151) (85,479)Owned real estate projects(1,072)(21,832)(5,323)(95,615)
Capital expenditures, excluding owned real estate projects(36,356) (27,518) (105,477) (88,535)Capital expenditures, excluding owned real estate projects(78,197)(55,163)(204,692)(196,274)
Purchases of cost method investments(5,272) —
 (10,722) (300)
Sale and maturities of cost method investments294
 —
 1,026
 315
Business combinations, net of cash acquiredBusiness combinations, net of cash acquired0 0 0 (12,885)
Purchases of non-marketable equity and other investmentsPurchases of non-marketable equity and other investments(4,618)(9,577)(63,218)(17,293)
Sales and maturities of non-marketable equity and other investmentsSales and maturities of non-marketable equity and other investments24 252 6,223 252 
Other(1,000) —
 (1,000) (296)Other0 0 0 (9)
Net cash provided by (used in) investing activities(595,458) (99,120) (617,002) (187,243)Net cash provided by (used in) investing activities(462,666)32,559 (942,651)(355,541)
Cash flows from financing activities       
Proceeds from borrowings on convertible senior notes, net of issuance costs1,132,101
 —
 1,132,101
 —
Proceeds from issuance of warrants80,805
 —
 80,805
 —
Purchase of convertible senior notes hedges(175,530) —
 (175,530) —
Cash flows from financing activities:Cash flows from financing activities:
Proceeds from borrowings on term loan, netProceeds from borrowings on term loan, net0 0 747,795 0 
Payments on convertible senior notesPayments on convertible senior notes0 (3)(249,946)(30)
Payments on term loanPayments on term loan(9,375)0 (9,375)0 
Proceeds from issuance of common stock from employee equity plans1,974
 4,491
 36,501
 33,267
Proceeds from issuance of common stock from employee equity plans3,650 1,780 78,167 63,320 
Other(36) 435
 (112) 1,006
Other(181)(175)(2,436)(375)
Net cash provided by (used in) financing activities1,039,314
 4,926
 1,073,765
 34,273
Net cash provided by (used in) financing activities(5,906)1,602 564,205 62,915 
Effect of exchange rate changes(322) (137) 261
 357
Effect of exchange rate changes40 48 546 (204)
Net increase (decrease) in cash, cash equivalents and restricted cash587,565
 (22,775) 796,203
 88,282
Cash, cash equivalents and restricted cash at the beginning of period750,532
 411,144
 541,894
 300,087
Cash, cash equivalents and restricted cash at the end of period$1,338,097
 $388,369
 $1,338,097
 $388,369
Net increase (decrease) in cash, cash equivalents, and restricted cashNet increase (decrease) in cash, cash equivalents, and restricted cash(174,730)292,211 336,795 274,654 
Cash, cash equivalents, and restricted cash at the beginning of periodCash, cash equivalents, and restricted cash at the beginning of period1,246,246 624,646 734,721 642,203 
Cash, cash equivalents, and restricted cash at the end of periodCash, cash equivalents, and restricted cash at the end of period$1,071,516 $916,857 $1,071,516 $916,857 



See Notes to Condensed Consolidated Financial Statements
6

Table of Contents

 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
Supplemental cash flow data       
Cash paid for interest, net of amounts capitalized$18
 $48
 $64
 $2,704
Cash paid for income taxes651
 655
 3,259
 4,802
Non-cash investing and financing activities:       
Vesting of early exercise stock options$106
 $445
 $670
 $1,365
Property and equipment, accrued but not paid47,055
 25,917
 47,055
 25,917
Non-cash additions to property and equipment649
 67
 1,276
 982
 October 31, 2017 October 31, 2016
  *As Adjusted
Reconciliation of cash, cash equivalents and restricted cash as shown in the statement of cash flows   
Cash and cash equivalents$1,336,984
 $386,557
Restricted cash included in Other assets1,113
 1,712
Restricted cash included in Property and equipment, net—
 100
Total cash, cash equivalents and restricted cash$1,338,097
 $388,369
*    See Note 2 for a summary of adjustments.


See Notes to Condensed Consolidated Financial Statements
7

Table of Contents

Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Supplemental cash flow data:
Cash paid for interest, net of amounts capitalized$5,309 $959 $11,686 $1,431 
Cash paid for income taxes2,598 1,415 7,239 7,418 
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid49,098 33,155 49,098 33,155 

As of October 31,
20202019
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents$1,067,038 $912,748 
Restricted cash included in Prepaid expenses and other current assets4,351 3,984 
Restricted cash included in Other assets127 125 
Total cash, cash equivalents, and restricted cash$1,071,516 $916,857 
See Notes to Condensed Consolidated Financial Statements
8
Table of Contents
Workday, Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Overview and Basis of Presentation
Company and Background
Workday providesdelivers financial management, human capitalresources, planning, spend management, and analytics applications designed for the world'sworld’s largest companies, educational institutions, and government agencies. We offer innovative and adaptable technology focused on the consumer internet experience and cloud delivery model. Our applications are designed for global enterprises to manage complex and dynamic operating environments. We provide our customers highly adaptable, accessible, and reliable applications to manage critical business functions that help enable them to optimize their financial and human capital resources. We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware. As used in this report, the terms "Workday," "registrant," "we," "us,"“Workday,” “registrant,” “we,” “us,” and "our"“our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"(“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission ("SEC"(“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, financial positionstockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the quarter ended October 31, 20172020, shown in this report are not necessarily indicative of the results to be expected for the full year ending January 31, 2018.2021. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017,2020, filed with the SEC on March 20, 2017.3, 2020.
Effective February 1, 2017, we adoptedThere have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the requirementsyear ended January 31, 2020, other than the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and ASU No. 2016-18, Statement of Cash Flows, Restricted Cashaccounting pronouncements as discusseddescribed in Note 2. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards, as indicated by the "as adjusted" footnote.
2, Accounting Standards. Certain prior period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. These estimates, judgments, and assumptions include, but are not limited to the fair value of assets acquired and liabilities assumed through business combinations, the determination of the period of benefit for deferred commissions, certain assumptions used in the valuation of equity awards, and assumptions used in the fair valuevaluation of assets acquired and liabilities assumed through business combinations.non-marketable equity investments. Actual results could differ from those estimates and such differences could be material to our condensed consolidated financial position and results of operations.statements.
Segment Information
We operate in one1 operating segment, cloud applications. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker,makers, who isare our chiefco-chief executive officer,officers, in deciding how to allocate resources and assessing performance. Our chief operating decision maker allocatesmakers allocate resources and assessesassess performance based upon discrete financial information at the consolidated level.

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Note 2. Accounting Standards and Significant Accounting Policies
Recently Adopted Accounting Pronouncements
ASU No. 2014-092016-13
In May 2014,June 2016, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. We adopted this standard effective February 1, 2020, using a modified retrospective approach, which resulted in a cumulative-effect adjustment of $0.2 million to Accumulated deficit.
Under the new standard, we assess our allowance for credit losses on trade receivables by taking into consideration forecasts of future economic conditions, information about past events, such as our historical trend of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. The allowance for credit losses on trade receivables is recorded in operating expenses on our condensed consolidated statements of operations.
With respect to available-for-sale debt securities, when the fair value of the security is below its amortized cost, the amortized cost should be written down to its fair value if i) it is more likely than not that management is required to sell the impaired security before recovery of its amortized basis or ii) management has the intention to sell the security. If neither of the conditions are met, we must determine whether the impairment is due to credit losses. To determine the amount of credit losses, we compare the present value of the expected cash flows of the security, derived by taking into account the issuers’ credit ratings and remaining payment terms, with its amortized cost basis. The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the security. An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in Other income (expense), net on our condensed consolidated statements of operations. Non-credit related impairment losses are recorded in Other comprehensive income (loss) (“OCI”).
ASU No. 2018-15
In August 2018, the FASB issued ASU No. 2014-09, Revenue from Contracts2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with Customers ("Topic 606"). Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition ("Topic 605"), andfor capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expectscapitalized costs to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, we refer to Topic 606 and Subtopic 340-40 as the "new standard."
We early adopted the requirements of the new standard as of February 1, 2017, utilizing the full retrospective method of transition. Adoption of the new standard resulted in changes to our accounting policies for revenue recognition, trade and other receivables, and deferred commissions as detailed below. We applied the new standard using a practical expedient where the consideration allocated to the remaining performance obligations or an explanation of when we expect to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.
The impact of adopting the new standard on our fiscal 2017 and fiscal 2016 revenues is not material. The primary impact of adopting the new standard relates to the deferral of incremental commission costs of obtaining subscription contracts. Under Topic 605, we deferred only direct and incremental commission costs to obtain a contract and amortized those costs on a straight-line basis generally over the term of the related subscription contract, which was generally three years or longer. Underarrangement, and the new standard, we defer all incremental commissionfinancial statement presentation for these capitalized costs to obtainwould be the contract. We amortize these costs on a straight-line basis over a periodsame as that of benefit that we have determined to be five years or the related contractual renewal period, depending on whether the contract is an initial or renewal contract, respectively.
ASU No. 2016-09
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies the accounting for share-based payment transactions, including accounting for income taxes, forfeitures, and classification in the statement of cash flows. As of February 1, 2017, we adopted the applicable provisions of ASU No. 2016-09 as follows:
The guidance requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement of operations when the awards vest or are settled, and eliminates the requirement to reclassify cash flowsfees related to excess tax benefits from operating activities to financing activities on the statement of cash flows. hosting arrangements.
We adopted the guidance prospectivelythis standard effective February 1, 2017. Amounts previously recorded to Additional paid-in capital related to windfall tax benefits prior to February 1, 2017 remain in Stockholders' equity.
The guidance eliminates the requirement that excess tax benefits must be realized (through2020, using a reduction in income taxes payable) before companies can recognize them. We have applied the modified retrospective transition method upon adoption.prospective approach. The previously unrecognized excess tax effects were recorded as a deferred tax asset in the amount of $448.0 million, of which $447.8 million was fully offset by a valuation allowance, and the remaining $0.2 million resulted in a cumulative-effect adjustment to Accumulated deficit as of February 1, 2017.
ASU No. 2016-18
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230), which requires that a statement of cash flows explain the change during the period for the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance is effective for our fiscal year beginning February 1, 2018. We early adopted ASU No. 2016-18 retrospectively, effective February 1, 2017. As a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the condensed consolidated statement of cash flows, net cash flows for the three months ended October 31, 2016 decreased by $4 million and net cash flows for the nine months ended October 31, 2016 increased by $2 million.

We adjusted our condensed consolidated financial statements from amounts previously reported due to the adoption of ASU No. 2014-09 and ASU No. 2016-18. Select condensed consolidated balance sheet line items, which reflect the adoption of thethis new ASU's are as follows (in thousands):
 January 31, 2017
 As Previously Reported Adjustments   As Adjusted
Assets       
Trade and other receivables, net$383,908
 $25,872
 a $409,780
Prepaid expenses and other current assets88,336
 (21,746) a 66,590
Deferred costs27,537
 23,793
 a 51,330
Deferred costs, noncurrent43,310
 73,939
 a 117,249
Liabilities       
Unearned revenue$1,097,417
 $(11,205) a $1,086,212
Unearned revenue, noncurrent135,970
 (639) a 135,331
Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of the new ASUs are as follows (in thousands, except per share data):
 Three Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Revenues:       
Subscription services$335,722
 $2,188
 a $337,910
Professional services73,860
 1,752
 a 75,612
Total revenues409,582
 3,940
 a 413,522
Costs and expenses:  

    
Sales and marketing149,549
 (12) a 149,537
Operating loss(109,884) 3,952
 a (105,932)
Net loss$(114,066) $3,952
 a $(110,114)
Net loss per share, basic and diluted$(0.57) $0.02
 a $(0.55)
 Nine Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Revenues:       
Subscription services$921,953
 $2,195
 a $924,148
Professional services210,782
 (74) a 210,708
Total revenues1,132,735
 2,121
 a 1,134,856
Costs and expenses:       
Sales and marketing416,217
 (4,162) a 412,055
Operating loss(270,430) 6,283
 a (264,147)
Net loss$(302,713) $6,283
 a $(296,430)
Net loss per share, basic and diluted$(1.54) $0.04
 a $(1.50)

Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of the new ASUs are as follows (in thousands):
 Three Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Cash flows from operating activities       
Net loss$(114,066) $3,952
 a $(110,114)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Amortization of deferred costs6,507
 5,054
 a 11,561
Changes in operating assets and liabilities:       
Trade and other receivables, net(20,360) (333) a (20,693)
Deferred costs(7,973) (5,067) a (13,040)
Prepaid expenses and other assets(1,425) (2,261) a, b (3,686)
Unearned revenue38,514
 (1,248) a 37,266
Net cash provided by (used in) operating activities71,459
 97
 b 71,556
Change in restricted cash3,900
 (3,900) b —
Net cash provided by (used in) investing activities(95,220) (3,900) b (99,120)
Net increase (decrease) in cash and cash equivalents(18,972) (3,803) b (22,775)
Cash, cash equivalents and restricted cash at the beginning of period405,529
 5,615
 b 411,144
Cash, cash equivalents and restricted cash at the end of period$386,557
 $1,812
 b $388,369
 Nine Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Cash flows from operating activities       
Net loss$(302,713) $6,283
 a $(296,430)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Amortization of deferred costs18,520
 14,397
 a 32,917
Changes in operating assets and liabilities:       
Trade and other receivables, net24,695
 594
 a 25,289
Deferred costs(23,247) (18,560) a (41,807)
Prepaid expenses and other assets(14,103) 2,735
 a, b (11,368)
Unearned revenue117,854
 (3,737) a 114,117
Net cash provided by (used in) operating activities239,183
 1,712
 b 240,895
Change in restricted cash(100) 100
 b —
Net cash provided by (used in) investing activities(187,343) 100
 b (187,243)
Net increase (decrease) in cash and cash equivalents86,470
 1,812
 b 88,282
Cash, cash equivalents and restricted cash at the end of period$386,557
 $1,812
 b $388,369
a
Adjusted to reflect the adoption of ASU No. 2014-09, Revenue from Contracts with Customers.
b
Adjusted to reflect the adoption of ASU No. 2016-18, Statement of Cash Flows, Restricted Cash.
Summary of Significant Accounting Policies
Except for the accounting policies for revenue recognition, trade and other receivables, and deferred commissions that were updated as a result of adopting ASU No. 2014-09, therestandard did not have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended January 31, 2017, filed with the SEC on March 20, 2017, that have had a material impact on our condensed consolidated financial statements. Subsequent impact on our condensed consolidated financial statements and related notes.

Revenue Recognition
We derive our revenues primarily from subscription services and professional services. Revenues are recognized when controlwill depend on the magnitude of these services is transferred to our customers, in an amount that reflects the consideration we expectimplementation costs to be entitledincurred. Implementation costs capitalized subsequent to adoption will be recognized in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
Subscription Services Revenues
Subscription services revenues primarily consist of fees that provide customers access to one or more of our cloud applications for finance, human resources, and analytics, with routine customer support. Revenue is generally recognized over time 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 non-cancelable.
Professional Services Revenues
Professional services revenues primarily consist of fees for deployment and optimization services, as well as training. The majority of our consulting contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices basedoperating expenses on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within our contracts.
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 doubtful accounts, which is not material. Other receivables represent unbilled receivables related to subscription and professional services contracts.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in Sales and marketing expenses in the accompanying condensed consolidated statements of operations.operations over the noncancelable period of the hosting arrangement plus any renewal periods reasonably certain to be taken.
Recently Issued Accounting PronouncementsASU No. 2019-12
In January 2016,December 2019, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which requires entities to carry all investmentssimplifies accounting guidance for certain tax matters including franchise taxes, certain transactions that result in equity securities at fair valuea step-up in tax basis of goodwill, and recognize anyenacted changes in fair valuetax laws in net income. We expectinterim periods. In addition, it eliminates a company’s need to electevaluate certain exceptions relating to the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable priceincremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in orderly transactionsforeign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses.
We adopted this standard effective February 1, 2020. We adopted the amendments in this update on a retrospective basis for the identical or a similar investmentprovision related to franchise taxes and prospectively for all other applicable amendments. The adoption of the same issuer. The guidance is effective for our fiscal year beginning February 1, 2018. Early adoption is permitted. We plan to adopt thethis new standard in the first quarter of fiscal 2019. We are evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC Topic 840 Leases. The guidance is effective for our fiscal year beginning February 1, 2019. Early adoption is permitted. We are evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior to the issuance of this ASU, existing guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset had been sold to an outside party. The guidance is effective for our fiscal year beginning February 1, 2018. Early adoption is permitted. We plan to adopt the new standard in the first quarter of fiscal 2019 and dodid not expect it to have a material impact on our condensed consolidated financial statements.
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Recently Issued Accounting Pronouncements
ASU No. 2020-04
In August 2017,March 2020, the FASB issued ASU No. 2017-12, Derivatives and Hedging2020-04, Reference Rate Reform (Topic 815)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which better aligns an entity’s risk management activitiesprovides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. We may elect to apply the amendments prospectively through December 31, 2022. The impact on our condensed consolidated financial statements from the adoption of this standard is expected to be immaterial.
ASU No. 2020-06
In August 2020, the FASB issued ASU No. 2020-06, Accounting for hedging relationships through changes to bothConvertible Instruments and Contracts in an Entity's Own Equity, which simplifies the designationaccounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and measurementmodifies the guidance for qualifying hedging relationships and the presentationon diluted earnings per share calculations as a result of hedge results. The guidancethese changes. This new standard is effective for our fiscal yearinterim and annual periods beginning February 1, 2019. Early2022, and earlier adoption is permitted. We are currently evaluating the accounting, transition and disclosure requirementsimpact of the adoption of this standard and cannot currently estimate theon our condensed consolidated financial statement impact of adoption.statements.
Note 3. MarketableInvestments
Debt Securities
AtAs of October 31, 2017, marketable2020, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$930,774 $274 $(26)$931,022 
U.S. agency obligations542,942 144 (136)542,950 
Corporate bonds355,847 2,442 (12)358,277 
Commercial paper367,413 0 0 367,413 
$2,196,976 $2,860 $(174)$2,199,662 
Included in Cash and cash equivalents$329,586 $1 $(1)$329,586 
Included in Marketable securities$1,867,390 $2,859 $(173)$1,870,076 
 Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. agency obligations$837,650
 $1
 $(813) $836,838
U.S. treasury securities698,398
 —
 (447) 697,951
Corporate bonds428,145
 14
 (406) 427,753
Commercial paper500,114
 —
 —
 500,114
Money market funds559,076
 —
 —
 559,076
Certificates of deposit5,000
 —
 —
 5,000
 $3,028,383
 $15
 $(1,666) $3,026,732
Included in cash and cash equivalents$1,152,599
 $—
 $(6) $1,152,593
Included in marketable securities$1,875,784
 $15
 $(1,660) $1,874,139
AtAs of January 31, 2017, marketable2020, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$312,183 $492 $(5)$312,670 
U.S. agency obligations169,613 99 (44)169,668 
Corporate bonds504,434 2,476 0 506,910 
Commercial paper364,701 0 0 364,701 
$1,350,931 $3,067 $(49)$1,353,949 
Included in Cash and cash equivalents$140,517 $0 $0 $140,517 
Included in Marketable securities$1,210,414 $3,067 $(49)$1,213,432 
 Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. agency obligations$908,874
 $179
 $(535) $908,518
U.S. treasury securities192,028
 48
 (25) 192,051
Corporate bonds290,272
 42
 (429) 289,885
Commercial paper323,106
 —
 —
 323,106
Money market funds24,425
 —
 —
 24,425
 $1,738,705
 $269
 $(989) $1,737,985
Included in cash and cash equivalents$281,163
 $—
 $—
 $281,163
Included in marketable securities$1,457,542
 $269
 $(989) $1,456,822

We do not believe the unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence, which includes our intent to hold these investments to maturity as of October 31, 2017. The unrealized losses on marketable securities which have been in a net loss position for 12 months or greater were not material as of October 31, 2017. We classify our marketabledebt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all marketabledebt securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets inon the accompanying condensed consolidated balance sheets. Debt securities included in Marketable securities on the condensed consolidated balance sheets consist of securities with original maturities at the time of purchase greater than three months, and the remainder of the securities are reflectedis included in cashCash and cash equivalents. We sold $33 million
The unrealized losses associated with our debt securities were immaterial as of October 31, 2020, and $63 millionJanuary 31, 2020, and we did not recognize any credit losses related to our debt securities during the three and nine months ended October 31, 2020.
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There were 0 sales of debt securities during the three months ended October 31, 20172020, and 2016, respectively, and $223 million and $922019. We sold $5 million of our marketabledebt securities during the nine months ended October 31, 20172020, and 2016, respectively.2019. The realized gains and losses from the sales arewere immaterial.
Equity Investments
Equity investments consisted of the following (in thousands):
Condensed Consolidated Balance Sheets LocationOctober 31, 2020January 31, 2020
Money market funds (1)
Cash and cash equivalents$517,031 $386,909 
Marketable equity investments (1)
Marketable securities10,696 0 
Equity investments accounted for under the equity methodOther assets48,181 0 
Non-marketable equity investments measured using the measurement alternative (2)
Other assets62,741 59,026 
$638,649 $445,935 
(1)Investments with readily determinable fair values.
(2)Investments in privately held companies without readily determinable fair values.
Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Net realized gains (losses) recognized on equity investments sold$0 $102 $1,591 $6,946 
Net unrealized gains (losses) recognized on equity investments held3,830 0 1,643 2,169 
Total net gains (losses) recognized in Other income (expense), net$3,830 $102 $3,234 $9,115 
We determine at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (“VIE”). If the investment or other interest is determined to be a VIE, we must evaluate whether we are considered the primary beneficiary. For investments in VIEs in which we are considered the primary beneficiary, the assets, liabilities, and results of operations of the VIE are consolidated in our condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to direct the activities that most significantly impact the VIE’s economic performance; and (2) has the obligation to absorb losses or the right to receive benefits from the VIE. As of October 31, 2020, there were no VIEs for which we were the primary beneficiary.
Equity Investments Accounted for Under the Equity Method
Investments in VIEs for which we are not the primary beneficiary or do not own a controlling interest but can exercise significant influence over the investee are accounted for under the equity method of accounting. These investments are measured at cost, less any impairment, plus or minus our share of earnings and losses and are included in Other assets on the condensed consolidated balance sheets. Our share of earnings and losses are recorded in Other income (expense), net, on the condensed consolidated statements of operations.
During the first quarter of fiscal 2021, we made an equity investment of $50 million in a limited partnership, which represents an ownership interest of approximately 6%. We determined that the limited partnership is a VIE because the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest. We do not have majority voting rights nor the power to direct the activities of this entity, and therefore, we are not the primary beneficiary. The investment is accounted for under the equity method of accounting as it is considered to be more than minor and we have the ability to exercise significant influence over the entity. The carrying value was $48 million as of October 31, 2020. There was 0 impairment loss recorded on this investment during the three and nine months ended October 31, 2020.



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Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or have significant influence. We adjust the carrying values of non-marketable equity investments based on observable price changes from orderly transactions for identical or similar investments of the same issuer. NaN material adjustments were made to the carrying value of the non-marketable equity investments as measured under the measurement alternative during the three and nine months ended October 31, 2020, and 2019.
Additionally, we assess our non-marketable equity investments quarterly for impairment. Our impairment analysis encompasses an assessment of the severity and duration of the impairment and a qualitative and quantitative analysis of other key factors including the investee’s financial metrics, market acceptance of the investee’s product or technology, other competitive products or technology in the market, general market conditions, and the rate at which the investee is using its cash. We also have considered the impacts of the coronavirus pandemic (“COVID-19 pandemic”) in our impairment analysis. These factors require significant judgment. We did 0t record any impairment losses on non-marketable equity investments for the three months ended October 31, 2020, and we recorded $3 million of impairment losses for the nine months ended October 31, 2020. We did 0t record any such impairment losses during the three and nine months ended October 31, 2019.
Non-marketable equity investments that have been remeasured during the period due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold.
Marketable Equity Investments
Marketable equity investments were $11 million as of October 31, 2020. We did not have any marketable equity investments as of January 31, 2020. There were 0 sales of marketable equity investments during the three and nine months ended October 31, 2020, or the three months ended October 31, 2019. We sold $51 million of marketable equity investments during the nine months ended October 31, 2019, with a corresponding gain recognized of $7 million.
Note 4. Fair Value Measurements
We measure our financial assetscash equivalents, marketable securities, and liabilitiesforeign currency derivative contracts at fair value at each reporting period using a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of October 31, 20172020 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$931,022 $0 $0 $931,022 
U.S. agency obligations0 542,950 0 542,950 
Corporate bonds0 358,277 0 358,277 
Commercial paper0 367,413 0 367,413 
Money market funds517,031 0 0 517,031 
Marketable equity investments10,696 0 0 10,696 
Foreign currency derivative assets0 20,478 0 20,478 
Total assets$1,458,749 $1,289,118 $0 $2,747,867 
Foreign currency derivative liabilities$0 $13,787 $0 $13,787 
Total liabilities$0 $13,787 $0 $13,787 
13
DescriptionLevel 1 Level 2 Level 3 Total
U.S. agency obligations$—
 $836,838
 $—
 $836,838
U.S. treasury securities697,951
 —
 —
 697,951
Corporate bonds—
 427,753
 —
 427,753
Commercial paper—
 500,114
 —
 500,114
Money market funds559,076
 —
 —
 559,076
Certificates of deposit—
 5,000
 —
 5,000
Foreign currency derivative assets—
 2,880
 —
 2,880
Total assets$1,257,027
 $1,772,585
 $—
 $3,029,612
Foreign currency derivative liabilities$—
 $15,172
 $—
 $15,172
Total liabilities$—
 $15,172
 $—
 $15,172
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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, 20172020 (in thousands):
Level 1Level 2Level 3Total
DescriptionLevel 1 Level 2 Level 3 Total
U.S. treasury securitiesU.S. treasury securities$312,670 $0 $0 $312,670 
U.S. agency obligations$—
 $908,518
 $—
 $908,518
U.S. agency obligations0 169,668 0 169,668 
U.S. treasury securities192,051
 —
 —
 192,051
Corporate bonds—
 289,885
 —
 289,885
Corporate bonds0 506,910 0 506,910 
Commercial paper—
 323,106
 —
 323,106
Commercial paper0 364,701 0 364,701 
Money market funds24,425
 —
 —
 24,425
Money market funds386,909 0 0 386,909 
Foreign currency derivative assets—
 7,909
 —
 7,909
Foreign currency derivative assets0 33,274 0 33,274 
Total assets$216,476
 $1,529,418
 $—
 $1,745,894
Total assets$699,579 $1,074,553 $0 $1,774,132 
Foreign currency derivative liabilities$—
 $2,127
 $—
 $2,127
Foreign currency derivative liabilities$0 $3,996 $0 $3,996 
Total liabilities$—
 $2,127
 $—
 $2,127
Total liabilities$0 $3,996 $0 $3,996 
Fair Value Measurements of Other Financial Instruments
The following table presents the carrying amounts and estimated fair values of our financial instruments that are not recorded at fair value inon the condensed consolidated balance sheets (in thousands):
 October 31, 2020January 31, 2020
 Net Carrying AmountEstimated Fair ValueNet Carrying AmountEstimated Fair Value
1.50% Convertible senior notes$0 $0 $244,319 $571,057 
0.25% Convertible senior notes1,053,550 1,732,671 1,017,967 1,587,978 
 October 31, 2017 January 31, 2017
 Net Carrying Amount Before Unamortized Debt Issuance Costs 
Estimated
Fair Value
 Net Carrying Amount Before Unamortized Debt Issuance Costs 
Estimated
Fair Value
0.75% Convertible senior notes$337,930
 $475,230
 $325,620
 $402,259
1.50% Convertible senior notes220,512
 367,425
 213,180
 310,470
0.25% Convertible senior notes931,866
 1,166,100
 —
 —
The difference between the principal amountIn June 2013, we completed an offering of the notes, $350 million for the 0.75% convertible senior notes, $250 million for theof 1.50% convertible senior notes anddue July 15, 2020 (“2020 Notes”), which were subsequently converted during the second quarter of fiscal 2021. In September 2017, we completed an offering of $1.15 billion for theof 0.25% convertible senior notes due October 1, 2022 (“2022 Notes” and together with the net2020 Notes, the “Notes”). The carrying amount before unamortized debt issuance costs representsamounts of the unamortized debt discount (see Note 10).Notes represent the liability components of the principal balances as of October 31, 2020, and January 31, 2020. The estimated fair valuevalues of the convertible senior notes,Notes, which we have classified as Level 2 financial instruments, waswere determined based on the quoted bid priceprices of the convertible senior notesNotes in an over-the-counter market on the last trading day of each reporting period.
Based The if-converted value of the 2022 Notes exceeded the principal amount by $493 million. The if-converted value was determined based on the closing price of our common stock of $110.99$210.12 on October 31, 2017,2020. For further information, see Note 10, Debt.
In April 2020, we entered into a credit agreement (“Credit Agreement”) pursuant to which the if-converted valueslenders would extend to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million (“Term Loan,”) and an unsecured revolving credit facility in an aggregate principal amount of $750 million (“Revolving Credit Facility”). As of October 31, 2020, the 0.75% convertible senior notes and the 1.50% convertible senior notes were greater than their respective principal amounts, and the if-convertedcarrying value of the 0.25% convertible senior notesTerm Loan was less than$739 million, and there were 0 outstanding borrowings under the respective principal amount.Revolving Credit Facility. The estimated fair value of the Term Loan, which we have classified as a Level 2 financial instrument, approximates its carrying value because it is a floating rate facility. For further information, see Note 10, Debt.
Note 5. Deferred Costs
Deferred costs, which primarily consist of deferred sales commissions, were $176$342 million and $169$323 million as of October 31, 20172020, and January 31, 2017,2020, respectively. Amortization expense for the deferred costs was $14$29 million and $12$23 million for the three months ended October 31, 20172020, and 2016,2019, respectively, and $42$82 million and $33$66 million for the nine months ended October 31, 20172020, and 2016,2019, respectively. There was no0 impairment loss in relation to the costs capitalized for the periods presented.
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Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
October 31, 2020January 31, 2020
Land and land improvements$37,065 $38,737 
Buildings493,757 489,028 
Computers, equipment, and software894,031 723,482 
Furniture and fixtures54,952 51,917 
Leasehold improvements200,807 189,668 
Property and equipment, gross1,680,612 1,492,832 
Less accumulated depreciation and amortization(704,002)(556,653)
Property and equipment, net$976,610 $936,179 
 October 31, 2017 January 31, 2017
Land$7,353
 $6,592
Buildings216,562
 115,302
Computers, equipment and software373,995
 323,311
Computers, equipment and software acquired under capital leases14,358
 18,298
Furniture and fixtures32,729
 24,462
Leasehold improvements122,881
 108,673
Property and equipment, gross (1)
767,878
 596,638
Less accumulated depreciation and amortization(280,644) (230,761)
Property and equipment, net$487,234
 $365,877
(1)
Property and equipment, gross includes construction-in-progress for owned real estate projects of $137 million and $115 million that have not yet been placed in service as of October 31, 2017 and January 31, 2017, respectively.
Depreciation expense totaled $30$58 million and $23$55 million for the three months ended October 31, 20172020, and 2016,2019, respectively, and $85$170 million and $67$144 million for the nine months ended October 31, 20172020, and 2016,2019, respectively. InterestNaN interest costs were capitalized to propertyProperty and equipment, totaled $3 millionnet during the three and $1 million fornine months ended October 31, 2020, or the three months ended October 31, 20172019. Interest costs capitalized to Property and 2016, respectively, andequipment, net totaled $6 million and $2 million for the nine months ended October 31, 2017 and 2016, respectively.2019.

Note 7. Acquisition-relatedAcquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following (in thousands):
October 31, 2020January 31, 2020
October 31, 2017 January 31, 2017
Acquired developed technology$64,900
 $64,900
Customer relationship assets1,000
 1,000
65,900
 65,900
Developed technologyDeveloped technology$218,400 $218,400 
Customer relationshipsCustomer relationships224,000 224,000 
Trade nameTrade name12,400 12,400 
BacklogBacklog11,000 11,000 
Acquisition-related intangible assets, grossAcquisition-related intangible assets, gross465,800 465,800 
Less accumulated amortization(31,595) (17,113)Less accumulated amortization(203,197)(157,399)
Acquisition-related intangible assets, net$34,305
 $48,787
Acquisition-related intangible assets, net$262,603 $308,401 
Amortization expense related to acquired developed technology and customer relationshipacquisition-related intangible assets was $4$14 million and $5$16 million for the three months ended October 31, 20172020, and 2016,2019, respectively, and $14$46 million and $8$55 million for the nine months ended October 31, 20172020, and 2016,2019, respectively.
As of October 31, 2017,2020, our future estimated amortization expense related to acquired developed technology and customer relationshipacquisition-related intangible assets is as follows (in thousands):
Fiscal Period:
Remainder of 2021$13,977 
202252,833 
202350,109 
202438,933 
202527,500 
Thereafter79,251 
Total$262,603 
15
Fiscal Period: 
2018$4,804
201918,904
202010,281
2021316
Total$34,305
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Note 8. Other Assets
Other assets consisted of the following (in thousands):
October 31, 2020January 31, 2020
Non-marketable equity and other investments (1)
$76,155 $75,004 
Equity investments accounted for under the equity method48,181 0 
Prepayments for goods and services20,219 27,928 
Technology patents and other intangible assets, net15,564 17,898 
Net deferred tax assets7,180 6,912 
Deposits5,869 6,335 
Derivative assets5,037 9,529 
Other1,782 999 
Total$179,987 $144,605 
 October 31, 2017 January 31, 2017
Cost method investments$24,320
 $14,004
Acquired land leasehold interest, net9,596
 9,676
Deposits4,101
 3,488
Net deferred tax assets1,820
 4,336
Other30,977
 22,066
Total$70,814
 $53,570
Our cost method(1)Included in non-marketable equity and other investments includeare investments in privateloan receivables of privately held companies, in which we do not haveare carried at amortized cost. The carrying values of these loan receivables were $13 million and $16 million as of October 31, 2020, and January 31, 2020, respectively. As of October 31, 2020, the ability to exert significant influence. The investmentsallowance for credit losses on this balance was immaterial.
Technology patents and other intangible assets with estimable useful lives are tested for impairment at least annually, and more frequently uponamortized on a straight-line basis. As of October 31, 2020, the occurrence of certain events.future estimated amortization expense is as follows (in thousands):
Fiscal Period:
Remainder of 2021$719 
20222,620 
20232,348 
20242,040 
20251,569 
Thereafter6,268 
Total$15,564 
Note 9. Derivative Instruments
We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency risk. To mitigate this risk, we utilize hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.
Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges
We are exposed to foreign currency fluctuations resulting from customer contracts denominated in foreign currencies. We have a hedging program in which we enter into foreign currency forward contracts related to certain customer contracts. We designate these forward contracts as cash flow hedging instruments assince the accounting criteria for such designation have been met. The effective portion of
Foreign currency forward contracts designated as cash flow hedges are recorded on the gainscondensed consolidated balance sheets at fair value. Cash flows from such forward contracts are classified as operating activities. Gains or losses resulting from changes in the fair value of these hedges isare recorded in Accumulated other comprehensive income (loss) ("OCI"(“AOCI”) on the condensed consolidated balance sheets and will be subsequently reclassified to the related revenue line item on the condensed consolidated statements of operations in the same period that the underlying revenues are earned. As of October 31, 2020, we estimate that $8 million of net gains recorded in AOCI related to our foreign currency forward contracts designated as cash flow hedges will be reclassified into income within the next 12 months.
As of October 31, 2020, and January 31, 2020, we had outstanding foreign currency forward contracts designated as cash flow hedges with total notional values of $1.2 billion and $908 million, respectively. The notional value represents the amount that will be bought or sold upon maturity of the forward contract. All such contracts have maturities not greater than 48 months.
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Foreign Currency Forward Contracts Not Designated as Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities. These forward contracts are intended to offset the foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the condensed consolidated balance sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these contracts resulting from changes in forward points are excluded from the assessment of hedge effectiveness andcontracts are recorded as incurred in Other income (expense), net on the condensed consolidated statements of operations. Cash flows from such forward contracts are classified as operating activities.
As of October 31, 20172020, and January 31, 2017,2020, we had outstanding foreign currency forward contracts not designated as cash flow hedges with total notional values of $470$115 million and $252$246 million, respectively. All contracts have maturities not greater than 35 months. The notional value represents the amount that will be bought or sold upon maturity of the forward contract.
Foreign Currency Forward Contracts not Designated as Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of the forward contracts are recorded in Other income (expense), net on the condensed consolidated statements of operations. These forward contracts are intended to offset the foreign currency gains or losses associated with the underlying monetary assets and liabilities. Cash flows from such forward contracts are classified as operating activities.
As of October 31, 2017 and January 31, 2017, we had outstanding forward contracts with total notional values of $51 million.

The fair values of outstanding derivative instruments were as follows (in thousands):
Condensed Consolidated Balance Sheets LocationOctober 31, 2020January 31, 2020
Derivative assets:
Foreign currency forward contracts designated as cash flow hedgesPrepaid expenses and other current assets$14,830 $20,944 
Foreign currency forward contracts designated as cash flow hedgesOther assets5,024 9,529 
Foreign currency forward contracts not designated as hedgesPrepaid expenses and other current assets611 2,801 
Foreign currency forward contracts not designated as hedgesOther assets13 0 
Total derivative assets$20,478 $33,274 
Derivative liabilities:
Foreign currency forward contracts designated as cash flow hedgesAccrued expenses and other current liabilities$6,072 $1,211 
Foreign currency forward contracts designated as cash flow hedgesOther liabilities7,049 1,809 
Foreign currency forward contracts not designated as hedgesAccrued expenses and other current liabilities643 976 
Foreign currency forward contracts not designated as hedgesOther liabilities23 0 
Total derivative liabilities$13,787 $3,996 
The effect of foreign currency forward contracts designated as cash flow hedges on the condensed consolidated statements of operations was as follows (in thousands):
Condensed Consolidated Statements of Operations LocationThree Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Total revenuesRevenues$1,105,960 $938,100 $3,186,312 $2,650,907 
Amount of gains (losses) related to foreign currency forward contracts designated as cash flow hedgesRevenues5,568 1,914 15,332 2,826 
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  Condensed Consolidated Balance Sheets Location October 31, 2017 January 31, 2017
Derivative Assets:      
Foreign currency forward contracts designated as cash flow hedges
 Prepaid expenses and other current assets and Other assets $2,535
 $7,149
Foreign currency forward contracts not designated as hedges Prepaid expenses and other current assets 345
 760
Derivative Liabilities:      
Foreign currency forward contracts designated as cash flow hedges
 Accrued expenses and other current liabilities and Other liabilities $13,424
 $1,605
Foreign currency forward contracts not designated as hedges Accrued expenses and other current liabilities 1,748
 522
GainsPre-tax gains (losses) associated with foreign currency forward contracts designated as cash flow hedges were as follows (in thousands):
  Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Locations Three Months Ended October 31, Nine Months Ended October 31,
   2017 2016 2017 2016
Gains (losses) recognized in OCI (effective portion) (1)
 Net change in market value of effective foreign currency forward exchange contracts $7,372
 $6,107
 $(16,526) $1,606
Gains (losses) reclassified from OCI into income (effective portion) Revenues 679
 183
 1,386
 436
Gains (losses) recognized in income (amount excluded from effectiveness testing and ineffective portion) Other income (expense), net 350
 517
 1,740
 833
Condensed Consolidated Statements of Operations and Statements of Comprehensive Loss LocationsThree Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Gains (losses) recognized in OCINet change in market value of effective foreign currency forward exchange contracts$8,612 $(8,607)$(7,153)$29,183 
Gains (losses) reclassified from AOCI into income (effective portion)Revenues5,568 1,914 15,332 2,826 
(1)
Of the total effective portion of foreign currency forward contracts designated as cash flow hedges as of October 31, 2017, net losses of $3 million are expected to be reclassified out of OCI within the next 12 months.
Gains (losses) associated with foreign currency forward contracts not designated as cash flow hedges were as follows (in thousands):
  Condensed Consolidated Statement of Operations Location Three Months Ended October 31, Nine Months Ended October 31,
Derivative Type  2017 2016 2017 2016
Foreign currency forward contracts not designated as hedges Other income (expense), net $829
 $1,195
 $(1,796) $654
Condensed Consolidated Statements of Operations LocationThree Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Foreign currency forward contracts not designated as hedgesOther income (expense), net$151 $(1,727)$1,524 $2,900 
We are subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is our policy to present the derivatives gross inon the condensed consolidated balance sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirementsrequirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and we do not believe we are subject to significant counterparty concentration risk given the short-term nature, volume, and size of the derivative contracts outstanding.by actively monitoring outstanding positions.

As of October 31, 2017,2020, information related to these offsetting arrangements was as follows (in thousands):
Gross Amounts of Recognized AssetsGross Amounts Offset on the Condensed Consolidated Balance SheetsNet Amounts of Assets Presented on the Condensed Consolidated Balance SheetsGross Amounts Not Offset on the Condensed Consolidated Balance SheetsNet Assets Exposed
Financial InstrumentsCash Collateral Received
Derivative assets:
Counterparty A$553 $0 $553 $(1,785)$0 $(1,232)
Counterparty B17,975 0 17,975 (4,732)0 13,243 
Counterparty C1,950 0 1,950 (7,270)0 (5,320)
Total$20,478 $0 $20,478 $(13,787)$0 $6,691 
Gross Amounts of Recognized LiabilitiesGross Amounts Offset on the Condensed Consolidated Balance SheetsNet Amounts of Liabilities Presented on the Condensed Consolidated Balance SheetsGross Amounts Not Offset on the Condensed Consolidated Balance SheetsNet Liabilities Exposed
Financial InstrumentsCash Collateral Pledged
Derivative liabilities:
Counterparty A$1,785 $0 $1,785 $(1,785)$0 $0 
Counterparty B4,732 0 4,732 (4,732)0 0 
Counterparty C7,270 0 7,270 (7,270)0 0 
Total$13,787 $0 $13,787 $(13,787)$0 $0 
18
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Condensed Consolidated Balance Sheets Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets Net Assets Exposed
     Financial Instruments Cash Collateral Received 
Derivative Assets:            
Counterparty A $1,781
 $—
 $1,781
 $(1,781) $—
 $—
Counterparty B 236
 —
 236
 (236) —
 —
Counterparty C 863
 —
 863
 (863) —
 —
Total $2,880
 $—
 $2,880
 $(2,880) $—
 $—
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  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Condensed Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets Net Liabilities Exposed
     Financial Instruments Cash Collateral Pledged 
Derivative Liabilities:            
Counterparty A $2,916
 $—
 $2,916
 $(1,781) $—
 $1,135
Counterparty B 11,088
 —
 11,088
 (236) —
 10,852
Counterparty C 1,154
 —
 1,154
 (863) —
 291
Counterparty D 14
 —
 14
 —
 —
 14
Total $15,172
 $—
 $15,172
 $(2,880) $—
 $12,292
Note 10. Convertible Senior Notes, NetDebt
Outstanding debt consisted of the following (in thousands):
October 31, 2020January 31, 2020
2020 Notes, net of unamortized debt discounts of $0 and $5,319, respectively, and unamortized debt issuance costs of $0 and $307, respectively$0 $244,319 
2022 Notes, net of unamortized debt discounts of $90,964 and $124,403, respectively, and unamortized debt issuance costs of $5,486 and $7,630, respectively1,053,550 1,017,967 
Term Loan, net of unamortized debt discounts of $1,783 and $0, respectively, and unamortized debt issuance costs of $164 and $0, respectively738,678 0 
Total debt$1,792,228 $1,262,286 
Less: current debt$(1,091,050)$(244,319)
Total debt, noncurrent$701,178 $1,017,967 
As of October 31, 2020, contractual repayments and maturities of our outstanding debt are as follows (in thousands):
Fiscal Period:
Remainder of 2021$9,375 
202237,500 
20231,225,000 
202475,000 
202575,000 
Thereafter468,750 
Total$1,890,625 
Convertible Senior Notes
In June 2013, we issued 0.75% convertible senior notes due July 15, 2018 ("2018 Notes") with a principal amount of $350 million. The 2018 Notes are unsecured, unsubordinated obligations, and interest is payable in cash in arrears at a fixed rate of 0.75% on January 15 and July 15 of each year. The 2018 Notes mature on July 15, 2018 unless repurchased or converted in accordance with their terms prior to such date. We cannot redeem the 2018 Notes prior to maturity.
Concurrently, we issued 1.50% convertible senior notes due July 15, 2020, ("2020 Notes") with a principal amount of $250 million. The 2020 Notes arewere unsecured, unsubordinated obligations, and interest iswas payable in cash in arrears at a fixed rate of 1.50% on January 15 and July 15 of each year. The 2020 Notes mature on July 15, 2020 unless repurchased or converted in accordance with their terms prior to such date. We cannot redeemDuring the second quarter of fiscal 2021, the 2020 Notes priorwere 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 maturity.note holders during the second quarter of fiscal 2021, which represents the conversion value in excess of the principal amount.
In September 2017, we issued 0.25% convertible senior notes due October 1, 2022, ("2022 Notes") with a principal amount of $1.15 billion (together with the 2018 Notes and 2020 Notes, referred to as "the Notes").billion. The 2022 Notes are unsecured, unsubordinated obligations, and interest is payable in cash in arrears at a fixed rate of 0.25% on April 1 and October 1 of each year. The 2022 Notes mature on October 1, 2022, unless repurchased or converted in accordance with their terms prior to such date. We cannot redeem the 2022 Notes prior to maturity.
The terms of the 2022 Notes are governed by Indenturesan Indenture by and between us and Wells Fargo Bank, National Association, as Trustee ("the Indentures"(“Indenture”). Upon conversion, holders of the 2022 Notes will receive cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at our election.
For the 2018 Notes, theThe initial conversion rate is 12.0075 shares of Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $83.28 per share of Class A common stock, subject to adjustment. Prior to the close of business on March 14, 2018, the conversion is subject to the satisfaction of certain conditions as described below. For the 2020 Notes, the initial conversion rate is 12.2340 shares of Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $81.74 per share of Class A common stock, subject to adjustment. Prior to the close of business on March 13, 2020, the conversion is subject to the satisfaction of certain conditions, as described below. Forfor the 2022 Notes the initial conversion rate is 6.7982 shares of Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $147.10 per share of Class A common stock, subject to adjustment. Prior to the close of business on May 31, 2022, conversion of the conversion2022 Notes is subject to the satisfaction of certain conditions, as described below.

Holders of the 2022 Notes who convert their 2022 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indentures)Indenture) are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the Indentures)Indenture), holders of the 2022 Notes may require us to repurchase all or a portion of their 2022 Notes at a price equal to 100% of the principal amount of the 2022 Notes, plus any accrued and unpaid interest.
Holders of the 2022 Notes may convert all or a portion of their 2022 Notes prior to the close of business on March 14, 2018 for the 2018 Notes, March 13, 2020 for the 2020 Notes, and May 31, 2022, for the 2022 Notes in multiples of $1,000 principal amount, only under the following circumstances:
•if the last reported sale price of our Class A common stock for at least 20 trading days during thea period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendarfiscal quarter is greater than or equal to 130% of the conversion price of the respective2022 Notes on each applicable trading day. This circumstance is effective for the 2022 Notes during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2018;day;
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•during the five5 business day period after any five5 consecutive trading day period in which the trading price per $1,000 principal amount of the respective2022 Notes for each day of that five5 day consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate of the respective2022 Notes on such trading day; or
•upon the occurrence of specified corporate events, as noted in the Indentures.Indenture.
On or after June 1, 2022, holders of the 2022 Notes may convert their 2022 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2022 Notes. For more than 20 trading days during the 30 consecutive trading days ended October 31, 2020, the last reported sale price of our Class A common stock exceeded 130% of the conversion price of the 2022 Notes. As a result, the 2022 Notes are convertible at the option of the holders during the fourth quarter of fiscal 2021. Accordingly, the 2022 Notes are classified as current on the condensed consolidated balance sheet as of October 31, 2020. From November 1, 2020, through the date of this filing, the amount of the principal balance of the 2022 Notes that has been converted or for which conversion has been requested was not material. As of January 31, 2020, the 2022 Notes are classified as noncurrent on the condensed consolidated balance sheets since the criteria for conversion was not met.
In accounting for the issuance of the Notes, we separated each of the Notes into liability and equity components. The carrying amounts of the liability components were calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amountamounts of the equity components representing the conversion option were determined by deducting the fair value of the liability components from the par value of the respective Notes. These differences represent debt discounts that are amortized to interest expense over the respective terms of the Notes using the effective interest rate method. The gross carrying amounts of the equity components recorded were $68 million and $223 million for the 2020 Notes and 2022 Notes, respectively, and were included in Additional paid-in capital on the condensed consolidated balance sheets upon issuance. The equity components are not remeasured as long as they continue to meet the conditions for equity classification. The effective interest rate of the liability component of the 2020 Notes was 6.25%, and the effective interest rate of the liability component of the 2022 Notes is 4.60%. The interest rates were based on the interest rates of similar liabilities at the time of issuance that did not have associated convertible features.
In accounting for the issuance costs related to the Notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability components are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the respective terms of the Notes. The issuance costs attributable to the equity components were netted against the respective equity components in Additional paid-in capital. For the 2018 Notes, we recorded liabilityUpon issuance costs of $7 million and equity issuance costs of $2 million. Amortization expense for the liability issuance costs was $0.4 million and $1 million for each of the three and nine month periods ended October 31, 2017 and 2016, respectively. For the 2020 Notes, we recorded liability issuance costs of $5 million and equity issuance costs of $2 million. Amortization expense for the liability issuance costs was $0.2 million, and $0.5 million for eachupon issuance of the three and nine month periods ended October 31, 2017 and 2016, respectively. For the 2022 Notes, we recorded liability issuance costs of $14 million and equity issuance costs of $4 million. Amortization expense for the liability issuance costs was $0.4 million for each of the three and nine month periods ended October 31, 2017.
The Notes, net consisted of the following (in thousands):
 October 31, 2017 January 31, 2017
 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes
Principal amounts:           
    Principal$350,000
 $250,000
 $1,150,000
 $350,000
 $250,000
 $—
    Unamortized debt discount(12,070) (29,488) (218,134) (24,380) (36,820) —
Net carrying amount before unamortized debt issuance costs337,930
 220,512
 931,866
 325,620
 213,180
 —
    Unamortized debt issuance costs(994) (1,824) (14,060) (2,050) (2,327) —
Net carrying amount$336,936
 $218,688
 $917,806
 $323,570
 $210,853
 $—
Carrying amount of the equity component (1)
$74,892
 $66,007
 $219,702
 $74,892
 $66,007
 $—
(1)
Included in the condensed consolidated balance sheets within Additional paid-in capital, net of $2 million, $2 million, and $4 million for the 2018 Notes, 2020 Notes, and 2022 Notes, respectively, in equity issuance costs.
As of October 31, 2017, the 2018 Notes have a remaining life of approximately 8 months and are classified as current on the condensed consolidated balance sheet. The 2020 Notes and the 2022 Notes have a remaining life of 32 months and 59 months, respectively, and are classified as non-current on the condensed consolidated balance sheet.

The effective interest rates of the liability components of the 2018 Notes, 2020 Notes, and 2022 Notes are 5.75%, 6.25%, and 4.60% respectively. These interest rates were based on the interest rates of similar liabilities at the time of issuance that did not have associated convertible features. The following table sets forth total interest expense recognized related to the Notes (in thousands):
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes
Contractual interest expense$656
 $938
 $367
 $656
 $938
 $—
 $1,969
 $2,813
 $367
 $1,969
 $2,813
 $—
Interest cost related to amortization of debt issuance costs352
 168
 365
 352
 167
 —
 1,056
 503
 365
 1,056
 504
 —
Interest cost related to amortization of the debt discount4,162
 2,482
 5,042
 3,930
 2,333
 —
 12,310
 7,332
 5,042
 11,622
 6,889
 —
We capitalized interest costs related to the Notes of $3 million and $1 million for the three months ended October 31, 2017 and 2016, respectively, and $6 million and $2 million for the nine months ended October 31, 2017 and 2016, respectively.
Notes Hedges
In connection with the issuance of the Notes, we entered into convertible note hedge transactions with respect to our Class A common stock ("(“Purchased Options"Options”). The Purchased Options relating to the 2018 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 4.2 million shares of our Class A common stock for $83.28 per share, exercisable upon conversion of the Notes. The Purchased Options relating to the 2020 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 3.1 million shares of our Class A common stock for $81.74 per share, exercisable upon conversion of the Notes. The Purchased Options relating to the 2022 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 7.8 million shares of our Class A common stock for $147.10 per share, exercisable upon conversion of the Notes. The Purchased Options will expire in 2018 for the 2018 Notes, in 2020 for the 2020 Notes, and in 2022 for the 2022 Notes, if not exercised earlier. The Purchased Options are intended to offset potential economic dilution to our Class A common stock upon any conversion of the Notes. The Purchased Options are separate transactions and are not part of the terms of the Notes. The amounts paid for the Purchased Options are included in Additional paid-in capital on the condensed consolidated balance sheets.
We paid an aggregate amountThe Purchased Options relating to the 2020 Notes gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2020 Notes, approximately 3.1 million shares of $144our Class A common stock for $81.74 per share, exercisable upon conversion of the 2020 Notes. During the second quarter of fiscal 2021, we received approximately 1.7 million forshares of our Class A common stock from the exercise of the Purchased Options relating to the 2018 Notes and 2020 Notes, and $176 million for theNotes. These shares are held as treasury stock.
The Purchased Options relating to the 2022 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes, approximately 7.8 million shares of our Class A common stock for $147.10 per share, exercisable upon conversion of the 2022 Notes. The amount paid for the Purchased Options is includedrelating to the 2022 Notes will expire in Additional paid-in capital in the condensed consolidated balance sheets.2022, if not exercised earlier.
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Warrants
In connection with the issuance of the Notes, we also entered into warrant transactions to sell warrants ("the Warrants"(“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 4.2 million shares over 60 scheduled trading days beginning in October 2018, 3.1 million shares over 60 scheduled trading days beginning in October 2020 and 7.8 million shares over 60 scheduled trading days beginning in January 2023 of our Class A common stock at an exercise price of $107.96 $107.96, and $213.96 per share, respectively. If the Warrants are not exercised on their exercise dates, they will expire. The Warrants 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. The Warrants are separate transactions and are not part of the terms of the Notes or the Purchased Options.
We received aggregate proceeds of $93 million from the sale of the Warrants related to the 2018 Notes and the 2020 Notes, and $81 million from the sale of the Warrants related to the 2022 Notes. The proceeds from the sale of the Warrants are recorded in Additional paid-in capital inon the condensed consolidated balance sheets.

During the three months ended October 31, 2020, Warrants related to the 2020 Notes were exercised, and we distributed approximately 0.2 million shares of our Class A common stock to warrant holders utilizing treasury stock. As of October 31, 2020, there were 2.7 million Warrants outstanding related to the 2020 Notes.
Credit Agreement
In April 2020, we entered into a credit agreement pursuant to which the lenders would extend to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million and an unsecured revolving credit facility in an aggregate principal amount of $750 million.
The Term Loan and Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin that ranges from 0% to 0.625%, or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin that ranges from 1.000% to 1.625%. The base rate is defined as the greatest of (i) Bank of America’s prime rate, (ii) the federal funds rate plus 0.50% or (iii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market for a period of one month (but not less than zero) plus 1.00%. Actual margins under either election will be based on our consolidated leverage ratio, which is measured by dividing (a) our consolidated funded indebtedness as of the fiscal quarter end by (b) our consolidated EBITDA as defined in the Credit Agreement for the most recently completed four consecutive fiscal quarters.
The Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The financial covenant, based on a quarterly financial test, requires Workday not to exceed a maximum leverage ratio of 3.50:1.00, subject to a step-up to 4.50:1.00 at the election of Workday for a certain period following an Acquisition (as defined in the Credit Agreement). As of October 31, 2020, we were in compliance with all covenants.
Term Loan
The Term Loan was funded in two individual tranches. On April 2, 2020, $500 million of the Term Loan was funded, and the remaining $250 million was funded on July 13, 2020.
The Term Loan matures on April 2, 2025, and provides for quarterly repayment in installments of the principal amount, beginning October 2020, at a rate of 1.25% of the principal amount per quarter through January 2022, and 2.50% of the principal amount per quarter thereafter. The Term Loan may be prepaid or permanently reduced by Workday without penalty or premium.
We incurred fees of approximately $2 million in connection with entering into the agreement for the Term Loan. The fees paid to lenders on the issuance of the debt are accounted for as a debt discount, while the remaining fees paid to third parties are accounted for as debt issuance costs. The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of the arrangement.
As of October 31, 2020, the Term Loan had a carrying value of $739 million, of which $38 million is classified as current and $701 million is classified as noncurrent on the condensed consolidated balance sheet. As of October 31, 2020, the interest rate on the Term Loan was 1.38% and the effective interest rate was 1.92%.
Revolving Credit Facility
The Revolving Credit Facility may be borrowed, repaid, and reborrowed until April 2, 2025, at which time all amounts borrowed must be repaid. We may request, no more than two times during the term of the Credit Agreement, that each revolving lender extend the maturity date for the revolving loans for one year. Additionally, we may request an increase in aggregate revolving commitments by up to $250 million at any time prior to April 2, 2025. The Revolving Credit Facility may be prepaid or permanently reduced by Workday without penalty or premium.
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We are required to pay each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the Revolving Credit Facility that ranges from 0.090% to 0.225% per annum, depending on our consolidated leverage ratio. The commitment fee is expensed as incurred and included within Other income (expense), net on the condensed consolidated statement of operations.
We incurred fees of approximately $2 million in connection with entering into the agreement for the Revolving Credit Facility. The fees are recorded in Other assets on the condensed consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.
As of October 31, 2020, there were 0 outstanding borrowings under the Revolving Credit Facility.
Interest Expense on Debt
The following table sets forth total interest expense recognized related to our debt (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Contractual interest expense$4,245 $1,657 $11,675 $4,969 
Interest cost related to amortization of debt discount11,374 13,584 38,993 40,256 
Interest cost related to amortization of debt issuance costs724 882 2,473 2,648 
Total interest expense$16,343 $16,123 $53,141 $47,873 
Note 11. Leases
We have entered into operating lease agreements for our office space, data centers, and other property and equipment. As of October 31, 2020, and January 31, 2020, operating lease right-of-use assets were $416 million and $291 million, respectively, and operating lease liabilities were $437 million and $308 million, respectively. We have also entered into finance lease agreements for other property and equipment. As of October 31, 2020, and January 31, 2020, finance leases were not material.
The components of operating lease expense were as follows (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Operating lease cost$24,638 $19,735 $67,873 $57,210 
Short-term lease cost3,443 4,135 11,875 11,980 
Variable lease cost4,563 4,042 13,899 12,606 
Total operating lease cost$32,644 $27,912 $93,647 $81,796 
Supplemental cash flow information related to our operating leases was as follows (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Cash paid for operating lease liabilities$22,765$19,089$64,930$54,597
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities (1)
113,21910,633183,722337,654
(1)Prior year activity includes $279 million for operating leases existing on February 1, 2019, and $59 million for operating leases that commenced during the nine months ended October 31, 2019.
Other information related to our operating leases was as follows:
October 31, 2020January 31, 2020
Weighted average remaining lease term (in years)66
Weighted average discount rate1.81%3.36%
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As of October 31, 2020, maturities of operating lease liabilities are as follows (in thousands):
Fiscal Period:
Remainder of 2021$21,398 
202294,858 
202383,040 
202476,189 
202565,123 
Thereafter139,056 
Total lease payments479,664 
Less imputed interest(42,212)
Total$437,452 
As of October 31, 2020, we have additional operating leases, primarily for office space and data centers, that have not yet commenced with total undiscounted lease payments of $10 million. These operating leases will commence in the remaining months of fiscal 2021, with lease terms ranging from one to five years.
Related-Party Lease Transactions
We lease certain office space from an affiliate of our Chairman of the Board, Mr. Duffield, adjacent to our corporate headquarters in Pleasanton, California, under various lease agreements. During the three months ended October 31, 2020, we entered into an agreement with this affiliated party for a fee of $1.5 million, which gives us the option to purchase these leased facilities at a price based on third-party appraisals and negotiation between Workday and the affiliated party. In the event we do not exercise the purchase option, which expires on March 1, 2021, the existing lease agreements will be automatically renewed for four years beyond the current lease end dates at rates determined based on independent third-party evaluations. As of October 31, 2020, we are not reasonably certain that the option to purchase the leased facilities will be exercised. We accounted for this arrangement, which was approved by our Board of Directors, as a lease modification during the three months ended October 31, 2020.
The operating lease right-of-use assets and operating lease liabilities related to these agreements were $139 million and $150 million, respectively, as of October 31, 2020, and $57 million and $70 million, respectively, as of January 31, 2020. The weighted average remaining lease term of these agreements is 8 years. The total rent expense under these agreements was $4 million and $3 million for the three months ended October 31, 2020, and 2019, respectively, and $12 million and $9 million for the nine months ended October 31, 2020, and 2019, respectively.
Note 11.12. Commitments and Contingencies
Facility and Computing Infrastructure-relatedThird-Party Hosted Infrastructure Platform-Related Commitments
We have entered into non-cancelablenoncancelable agreements for certain of our offices and data centerswith third-party hosted infrastructure platform vendors with various expiration dates. CertainAs of our office leases are with an affiliate of our Chairman, David Duffield, who is also a significant stockholder (see Note 17). Our operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments if exercised. This includes payments for office and data center square footage, as well as data center power capacity for certain data centers. We generally recognize these expenses on a straight-line basis over the period in which we benefit from the lease and we have accrued for rent expense incurred but not paid. Total rent expense was $21 million and $19 million for the three months ended October 31, 2017 and 2016, respectively, and $60 million and $53 million for the nine months ended October 31, 2017 and 2016, respectively.
In January 2014, we entered into a 95-year lease for a 6.9-acre parcel of vacant land in Pleasanton, California,2020, future noncancelable minimum payments under which we paid $2 million for base rent from commencement through December 31, 2020. Annual rent payments of $0.2 million plus increases based on increases in the consumer price index begin on January 1, 2021 and continue through the end of the lease.
Additionally, we have entered into a non-cancelable agreement with a computing infrastructure vendor that expires on October 31, 2024.these agreements were approximately $445 million.
Legal Matters
We are a party to various legal proceedings and claims whichthat arise in the ordinary course of business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In our opinion, as of October 31, 2017,2020, there was not at least a reasonable possibility that we had incurred or will incur a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.
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Note 12. Common Stock and13. Stockholders’ Equity
Common Stock
As of October 31, 2017,2020, there were 137179 million shares of Class A common stock, net of treasury stock, and 7360 million shares of Class B common stock outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one1 vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.
Employee Equity Plans
Our 2012 Equity Incentive Plan ("EIP"(“EIP”) serves as the successor to our 2005 Stock Plan (together with the EIP, the "Stock Plans"“Stock Plans”). Pursuant to the terms of the EIP, the share reserve increased by 10 million shares in March 2017, and asAs of October 31, 2017,2020, we had approximately 6163 million shares of Class A common stock available for future grants.
We also have a 2012 Employee Stock Purchase Plan ("ESPP"(“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, of each year. Pursuant to the terms of the ESPP, the share reserve increased by 2 million shares in March 2017. As of October 31, 2017, 72020, 5 million shares of Class A common stock were available for issuance under the ESPP.

Stock Options
The Stock Plans provide for the issuance of incentive and nonstatutory options to employees and non-employees. Options issued under the Stock Plans generally are exercisable for periods not to exceed 10 years and generally vest over five years. A summary of information related to stock option activity during the nine months ended October 31, 2017 is as follows:
 
Outstanding
Stock
Options
 
Weighted-
Average
Exercise
Price
 
Aggregate
Intrinsic
Value (in millions)
Balance as of January 31, 20179,096,592
 $4.34
 $716
Stock options granted—
 —
  
Stock options exercised(2,016,123) 4.60
  
Stock options canceled(9,975) 7.77
  
Balance as of October 31, 20177,070,494
 $4.26
 $755
Vested and expected to vest as of October 31, 20177,070,356
 $4.26
 $755
Exercisable as of October 31, 20177,068,894
 $4.26
 $754
As of October 31, 2017, there was a total of $0.3 million in unrecognized compensation cost related to unvested stock options which is expected to be recognized over a weighted-average period of approximately three months.
Restricted Stock Units
The Stock Plans provide for the issuance of restricted stock units ("RSUs"(“RSUs”) to employees.employees and non-employees. RSUs generally vest over four years. A summary of information related to RSU activity during the nine months ended October 31, 20172020, is as follows: 
Number of SharesWeighted-Average Grant Date Fair Value
Number of  Shares 
Weighted-Average
Grant Date Fair Value
Balance as of January 31, 201711,502,721
 $78.45
Balance as of January 31, 2020Balance as of January 31, 202011,914,064 $147.96 
RSUs granted7,011,426
 87.22
RSUs granted7,963,747 150.76 
RSUs vested(4,445,556) 78.02
RSUs vested(4,630,623)138.81 
RSUs forfeited(807,255) 78.46
RSUs forfeited(828,949)147.34 
Balance as of October 31, 201713,261,336
 $83.23
Balance as of October 31, 2020Balance as of October 31, 202014,418,239 152.48 
As of October 31, 2017,2020, there was a total of $1.0$2.0 billion in unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years.
Performance-basedPerformance-Based Restricted Stock Units
During fiscal 2017, 0.32020, 0.6 million shares of performance-based restricted stock units ("PRSUs"(“PRSUs”) were granted to all employees other than executive management andthat included both service conditions and performance conditions related to company-wide goals .goals. These performance conditions were met and the PRSUs vested on March 15, 2017.2020. During the nine months ended October 31, 2017,2020, we recognized $6$19 million in compensation cost related to these PRSUs.
Additionally, during fiscal 2018, 0.42021, 0.6 million shares of PRSUs were granted to all employees other than executive management andthat included both service conditions and performance conditions related to company-wide goals. We expect to grant additional shares related to this program for employees hired in fiscal 2018.2021. These PRSU awards will vest if the performance conditions are achieved for the fiscal year ended January 31, 20182021, and if the individual employee continues to provide service through the vesting date of March 15, 2018.2021. During each of the three and nine months ended October 31, 2017,2020, we recognized $12$36 million and $18$55 million respectively, in compensation cost related to these PRSUs, and there is aPRSUs. A total of $19$54 million in unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately four months.
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Stock Options
The Stock Plans provide for the issuance of incentive and nonstatutory stock options to employees and non-employees. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five years. A summary of information related to stock option activity during the nine months ended October 31, 2020, is as follows (in millions, except share and per share data):
Outstanding Stock OptionsWeighted-Average Exercise PriceAggregate Intrinsic Value
Balance as of January 31, 20203,435,577 $9.78 $601 
Stock options exercised(1,709,799)6.32 
Stock options canceled(41,363)39.22 
Balance as of October 31, 20201,684,415 12.57 333 
Vested and expected to vest as of October 31, 20201,679,303 12.50 332 
Exercisable as of October 31, 20201,521,062 10.33 304 
As of October 31, 2020, there was a total of $13 million in unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately five months.one year.
Note 13.14. Unearned Revenue and Performance Obligations
$421Subscription services revenue of $846 million and $308$722 million of subscription services revenue was recognized during the three months ended October 31, 20172020, and 2016,2019, respectively, that was included in the unearned revenue balances at the beginningas of the respective periods. $1.2July 31, 2020, and 2019, respectively. Subscription services revenue of $1.90 billion and $841 million of subscription services revenue$1.60 billion was recognized during the nine months ended October 31, 20172020, and 2016,2019, respectively, that was included in the unearned revenue balances at the beginningas of the respective periods.January 31, 2020, and 2019, respectively. Professional services revenue recognized in the same periods from unearned revenue balances at the beginning of the respective periods was not material.

Transaction Price Allocated to the Remaining Performance Obligations
As of October 31, 2017,2020, approximately $4.5$8.87 billion of revenue is expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenue on approximately two thirds$5.94 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter. Revenue from remaining performance obligations for professional services contracts as of October 31, 20172020, was not material.
Note 14.15. Other Income (Expense), Net
Other income (expense), net consisted of the following (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Interest income$3,610 $10,803 $16,455 $32,392 
Interest expense (1)
(16,370)(16,205)(53,211)(42,279)
Other (2)
3,914 1,266 5,484 12,786 
Other income (expense), net$(8,846)$(4,136)$(31,272)$2,899 
(1)Interest expense includes the contractual interest expense of the Notes and Term Loan, and the related non-cash interest expense attributable to amortization of the debt discounts and debt issuance costs, net of capitalized interest costs. For further information, see Note 10, Debt.
(2)Other includes the net gains (losses) from our equity investments, the commitment fee on the Revolving Credit Facility, and amortization of issuance costs on the Revolving Credit Facility. For further information, see Note 3, Investments, and Note 10, Debt.
25
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
Interest income$6,394
 $2,805
 $15,474
 $7,916
Interest expense (1)
(12,285) (7,206) (26,111) (23,151)
Gain from sale of cost method investment194
 —
 720
 65
Impairment of cost method investment(100) —
 (100) (15,000)
Other income (expense)2,055
 1,296
 5,550
 34
Other income (expense), net$(3,742) $(3,105) $(4,467) $(30,136)
(1)
Interest expense includes the contractual interest expense related to the 2018 Notes, 2020 Notes and 2022 Notes and non-cash interest related to amortization of the debt discount and debt issuance costs, net of capitalized interest costs (see Note 10).
Note 15.16. Income Taxes
We compute the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income or loss and adjust for discrete tax items in the period. We reported aan income tax expense of $6$4 million and $2an income tax benefit of $1 million for each of the nine-month periods ended October 31, 2020, and 2019, respectively. The income tax expense for the nine months ended October 31, 2017 and 2016, respectively. The income tax provision for the nine months ended October 31, 20172020, was primarily attributable to state taxes and income tax expenses in profitable foreign jurisdictions. There were no intra-period tax allocations for the gains from comprehensive income due to the adoption of ASU No. 2019-12 on February 1, 2020. The income tax provisionbenefit for the nine months ended October 31, 20162019, was primarily attributable to $3 millionthe application of intra-period tax allocation rules for the gains from comprehensive income and the excess tax benefits in certain foreign jurisdictions from share-based compensation, partially offset by state taxes and income tax expenses in profitable foreign jurisdictions, partiallyjurisdictions.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic. The CARES Act includes temporary changes to income and non-income based tax laws. We evaluated the applicable provisions of the CARES Act and determined that there is no material impact to our financial results.
On June 22, 2020, the U.S. Supreme Court declined to hear the appeal of a ruling by the U.S. Court of Appeals for the Ninth Circuit regarding the treatment of stock-based compensation expenses in a cost-sharing agreement (Altera Corporation & Subsidiaries v. Commissioner). The U.S. Supreme Court decision resulted in an immaterial reduction in our deferred tax assets relative to the total gross deferred tax assets, which was fully offset by $1 million income tax benefits from theour valuation allowance release related to certain acquired intangible assets fromallowance. As a business acquisition.result, there was no net impact on our condensed consolidated financial statements.
We are subject to income tax audits in the U.S. and foreign jurisdictions. We record liabilities related to uncertain tax positions and believe that we have provided adequate reserves for income tax uncertainties in all open tax years. Due to our history of tax losses, all years remain open to tax audit.
We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. As of October 31, 2017,2020, we continue to maintain a full valuation allowance on our deferred tax assets except forin certain jurisdictions.
Note 16.17. Net Loss Per Share
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.period, net of treasury stock. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including our outstanding stock options, outstanding warrants, common stock related to unvested early exercised stock options,RSUs and PRSUs, common stock related to unvested restricted stock units and awards and convertible senior notes to the extent dilutive, outstanding warrants, and common stock issuable pursuant to the ESPP. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.
The net loss per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the loss for the yearperiod had been distributed. As the liquidation and dividend rights are identical, the net loss attributable to common stockholders is allocated on a proportionate basis.
We consider shares issued upon the early exercise of options subject to repurchase and unvested restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares. In future periods, to the extent we are profitable, we will subtract earnings allocated to these participating securities from net income to determine net income attributable to common stockholders.

The following table presents the calculation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share data):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Class AClass BClass AClass BClass AClass BClass AClass B
Net loss per share, basic and diluted:
Numerator:
Allocation of distributed net loss$(18,199)$(6,141)$(83,529)$(32,200)$(156,526)$(54,198)$(252,634)$(100,082)
Denominator:
Weighted-average common shares outstanding178,004 60,055 164,896 63,565 175,071 60,614 161,924 64,147 
Basic and diluted net loss per share$(0.10)$(0.10)$(0.51)$(0.51)$(0.89)$(0.89)$(1.56)$(1.56)
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 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  * As Adjusted  * As Adjusted
 Class A Class B Class A Class B Class A Class B Class A Class B
Net loss per share, basic and diluted:               
Numerator:               
Allocation of distributed net loss$(55,592) $(29,954) $(68,192) $(41,922) $(149,179) $(82,943) $(181,470) $(114,960)
Denominator:               
Weighted-average common shares outstanding135,941
 73,247
 123,534
 75,945
 132,851
 73,864
 120,658
 76,435
Basic and diluted net loss per share$(0.41) $(0.41) $(0.55) $(0.55) $(1.12) $(1.12) $(1.50) $(1.50)
*
Adjusted to reflect adoptionPotentially dilutive securities that are not included in the calculation of ASU No. 2014-09, Revenue from Contracts with Customers. For further information, see Note 2.
The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share werebecause doing so would be antidilutive are as follows (in thousands):
 As of October 31,
 20202019
Outstanding common stock options1,685 4,009 
Unvested RSUs and PRSUs15,062 13,329 
Shares related to the convertible senior notes7,818 10,876 
Shares subject to warrants related to the issuance of convertible senior notes10,520 10,876 
Shares issuable pursuant to the ESPP463 394 
Total35,548 39,484 
 As of October 31,
 2017 2016
Outstanding common stock options7,070
 9,694
Shares subject to repurchase15
 236
Unvested restricted stock awards, units, and PRSUs13,680
 12,761
Shares related to the convertible senior notes15,079
 7,261
Shares subject to warrants related to the issuance of convertible senior notes15,079
 7,261
Shares issuable pursuant to the ESPP375
 359
 51,298
 37,572
Note 17. Related Party Transactions
We currently lease certain office space from an affiliate of our Chairman, Mr. Duffield, adjacent to our corporate headquarters in Pleasanton, California under various lease agreements. The average term of the agreements is 10 years and the total rent due under the agreements is $9 million for the fiscal year ended January 31, 2018, and $101 million in total. Rent expense under these agreements was $2 million for each of the three month periods ended October 31, 2017 and 2016, and $6 million for each of the nine month periods ended October 31, 2017 and 2016.

Note 18. Geographic Information
Disaggregation of Revenue
We sell our subscription contracts and related services in two2 primary geographical markets: to customers located in the United States and to customers located outside of the United States. Revenue by geography is generally based on the address of the customer as specified in our master subscription agreement. The following table sets forth revenue by geographic area (in thousands):
 Three Months Ended October 31,Nine Months Ended October 31,
 2020201920202019
United States$833,544 $704,263 $2,400,940 $2,009,360 
Other countries272,416 233,837 785,372 641,547 
Total$1,105,960 $938,100 $3,186,312 $2,650,907 
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
United States$439,794
 $335,592
 $1,242,431
 $929,031
Other countries115,595
 77,930
 318,139
 205,825
Total$555,389
 $413,522
 $1,560,570
 $1,134,856
*
Adjusted to reflect adoption of ASU No. 2014-09, Revenue from Contracts with Customers. For further information, see Note 2.
No single country other than the United States had revenues greater than 10% of total revenues for the three and nine months ended October 31, 20172020, and 2016.2019. No customer individually accounted for more than 10% of our trade and other receivables, net as of October 31, 20172020, or January 31, 2017.2020.
Long-Lived Assets
We attribute ourOur 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. The following table sets forth propertyAggregate Property and equipment, net, and Operating lease right-of-use assets by geographic area was as follows (in thousands):
 October 31, 2020January 31, 2020
United States$1,185,510 $1,064,292 
Ireland133,923 122,619 
Other countries72,724 40,170 
Total$1,392,157 $1,227,081 
27
 October 31, 2017 January 31, 2017
United States$428,040
 $321,442
Ireland46,797
 35,720
Other countries12,397
 8,715
Total$487,234
 $365,877

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements.statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "seek," "plan,"“believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plan,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, operating results, of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those arising from the impact of the coronavirus pandemic (“COVID-19 pandemic”), as well as those described in the "Risk Factors" section.“Risk Factors” section, which we encourage you to read carefully. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations.
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in Part I, Item 1 of this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, as well as in the section entitled "Risk Factors."Quarterly Report on Form 10-Q.
Overview
Workday providesFounded in 2005, Workday delivers financial management, human capitalresources, planning, spend management, and analytics applications designed for the world'sworld’s largest companies, educational institutions, and government agencies. We offer innovative and adaptable technology focused on the consumer Internet experience and cloud delivery model. Our applications are designed for global enterprises tohelp organizations better manage complex and dynamic operating environments. We provide our customers highly adaptable, accessible and reliable applications to manage critical business functions that enable them to optimize their financial and human capital resources.resources with one system that helps enable them to plan, execute, analyze, and extend — all powered by machine learning.
We were founded in 2005 to deliver cloud applications toOur diverse customer base includes medium and large global enterprises. Our applications are designed around the way people work today—in an environmentcompanies as well as smaller organizations that is global, collaborative, fast-paced and mobile.primarily use our planning product. Our cycle of frequent updates has facilitated rapid innovation and the introduction of new applications throughout our history. We began offering our Human Capital Management ("HCM")HCM application in 2006 and our Financial Management application in 2007. Since then we have continued to invest in innovation and have consistently introduced new services to our customers.
We offer Workday applications to our customers on an enterprise-wide subscription basis, typically with three-year or longer terms and with subscription fees largely based on the size of the customer’s workforce. We generally recognize revenues from subscription fees ratably over the term of the contract. We currently derive a substantial majority of our subscription services revenues from subscriptions to our HCM application. We market our applications through our direct sales force.
Our diverse customer base includes medium-sized and large, global companies. We have achieved significant growth in a relatively short period of time with a substantial amount of our growth coming from new customers. Our current financial focus is on growing our revenues and expanding our customer base. While we are incurring net losses today, we strive to invest in a disciplined manner across all of our functional areas to sustain continued near-term revenue growth and support our long-term initiatives.
We offer Workday applications to our customers on an enterprise-wide subscription basis, typically with contract terms of three years or longer and with subscription fees largely based on the size of the customer’s workforce. We generally recognize revenue from subscription fees ratably over the term of the contract. We currently derive a substantial majority of our subscription services revenue from subscriptions to our HCM application. We market our applications primarily through our direct sales force.
Our operating expenses have increased significantly in absolute dollars in recent periods, primarily due to the significant growth of our employee population. We had approximately 7,90012,400 and approximately 6,40011,800 employees as of October 31, 20172020, and 2016,2019, respectively. Excluding the impact of certain COVID-19 factors further described below, we expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues to decrease over the longer term as we grow our revenues, and we anticipate that we will gain economies of scale by increasing our customer base without direct incremental development costs.

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We intend to continue investing for long-term growth. We have invested and expect to continue to invest heavily in our applicationproduct development efforts to deliver additional compelling applications and to address customers’ evolving needs. In addition, we plan to continue to expand our ability to sell our applications globally, particularly in Europe and Asia, by investing in product development and customer support to address the business needs of local markets, increasing our sales and marketing organizations, acquiring, building and/or leasing additional office space, and expanding our ecosystem of service partners to support local deployments. We expect to make further significant investments in our data center infrastructurecapacity and equipment as we plan for future growth. We are also investing in personnel to service our growing customer base. These
We also regularly evaluate acquisitions and investment opportunities in complementary businesses, employee teams, services, technologies, and intellectual property rights in an effort to expand our product and service offerings. We expect to continue making such acquisitions and investments in the future, and we plan to reinvest a significant portion of our incremental revenues in future periods to grow our business and continue our leadership role in the industry. While we remain focused on improving operating margins, these acquisitions and investments will increase our costs on an absolute basis in the near-term.near term. Many of these investments will occur in advance of experiencing any direct benefit from them and willcould make it difficult to determine if we are allocating our resources efficiently. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues to decrease over time as we grow our revenues, and we anticipate that we will gain economies of scale by increasing our customer base without direct incremental development costs and by utilizing more of the capacity of our data centers.
Since inception, we have also invested heavily in our professional services organization to help ensure that customers successfully deploy and adopt our applications. Additionally, we continue to expand our professional service partner ecosystem to further support our customers. We believe our investment in professional services, as well as partners building consulting practices around Workday, will drive additional customer subscriptions and continued growth in revenues. Due to our ability to leverage the expanding partner ecosystem, we expect that the rate of professional services revenue growth will decline over time and continue to be lower than subscription revenue growth.
Impact of the COVID-19 Pandemic
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic (“COVID-19 pandemic”). The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global societies, economies, financial markets, and business practices. In response to COVID-19, we have temporarily closed the majority of our global offices, required most of our employees to work remotely, implemented travel restrictions, postponed certain of our customer, industry, implementation partner, analyst, investor, and employee events and converted others to virtual-only experiences. Despite the economic challenges brought on by the COVID-19 pandemic, we are committed to the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy.
During the three months ended October 31, 2020, we achieved solid new subscription bookings results as demand for our products remained strong despite the uncertain environment. Our operating margins for the three months ended October 31, 2020, have been favorably impacted by our revenue growth outpacing headcount growth as well as moderation of operating expenses in response to the COVID-19 pandemic. We do not anticipate the extent of the favorable margin impact experienced for the three months ended October 31, 2020, to continue long-term as we remain committed to investing in our business to drive top line growth and to support our growing base of customers.
Our near-term revenues are relatively predictable as a result of our subscription-based business model. However, if the economic uncertainty remains for a prolonged period, we may experience a further negative impact on new business, customer renewals, sales and marketing efforts, revenue growth rates, customer deployments, customer solvency, product development, or other financial metrics, any of which could harm our business, operating results, and financial condition.
For further discussion of the potential impacts of the COVID-19 pandemic on our business, operating results, and financial condition, see Risk Factors included in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Components of Results of Operations
Revenues
We primarily derive our revenues from subscription services and professional services. Subscription services revenues primarily consistrevenue principally consists of fees that give our customers access to our cloud applications, which include related customer support. Professional services revenue includes fees includefor deployment services, optimization services, and training.
Subscription services revenuesrevenue accounted for 83%88% and 87% of our total revenues duringfor the three and nine months ended October 31, 20172020, respectively, and represented 96% of our total unearned revenue as of October 31, 2017.2020. Subscription services revenues arerevenue is driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications.
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The mix of the applications to which a customer subscribes can affect our financial performance due to price differentials in our applications. Pricing for our applications varies based on many factors, including the complexity and maturity of the application and its acceptance in the marketplace. New products or services offerings by competitors in the future could also impact the mix and pricing of our offerings.
Subscription services revenues arerevenue is recognized over time as theyservices are delivered and consumed concurrently over the contractual term, beginning on the date our service is made available to the customer. Our subscription contracts typically have a term of three years or longer and are generally non-cancelable.noncancelable. We generally invoice our customers annually in advance. Amounts that have been invoiced are initially recorded as unearned revenue.
The majority of ourOur consulting engagements are generally billed on a time and materials basis or fixed price basis. For contracts billed on a time and revenues are typicallymaterials basis, revenue is recognized over time as the professional services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion of the professional services performed. In some cases, we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements. As our professional services organization and the Workday-related consulting practices of our partner firms continue to develop, we expect thethese partners to increasingly contract directly with our subscription customers. As a result of this trend, and the increase of our subscription services revenues,revenue, we expect our professional services revenuesrevenue as a percentage of total revenues to decline over time.
Costs and Expenses
Costs of subscription services revenues.revenue. Costs of subscription services revenues consistrevenue consists primarily of employee-related expenses related to hosting our applications and providing customer support, the costs of data center capacity,expenses, and depreciation of computer equipment and software.
Costs of professional services revenuesrevenue. Costs of professional services revenues consistrevenue consists primarily of employee-related expenses associated with these services, the cost of subcontractorssubcontractor expenses, and travel.travel expenses.
Product development. Product development expenses consist primarily of employee-related costs.expenses. We continue to focus our product development efforts on adding new features and applications, increasing the functionality, and enhancing the ease of use of our cloud applications.

Sales and marketing. Sales and marketing expenses consist primarily of employee-related costs,expenses, sales commissions, marketing programs, and travel.travel expenses. Marketing programs consist of advertising, events, corporate communications, brand buildingawareness, and product marketing activities. Sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period.
General and administrative. General and administrative expenses consist of employee-related costsexpenses for finance and accounting, legal, human resources, and management information systems personnel, professional fees, and other corporate expenses.
Results of Operations
Revenues
Our total revenues for the three and nine months ended October 31, 20172020, and 20162019, were as follows (in thousands, except percentages):
 Three Months Ended October 31, Nine Months Ended October 31, 
 20202019% Change20202019% Change
Subscription services$968,547 $798,516 21%$2,782,201 $2,256,695 23%
Professional services137,413 139,584 (2)%404,111 394,212 3%
Total revenues$1,105,960 $938,100 18%$3,186,312 $2,650,907 20%
 Three Months Ended October 31,   Nine Months Ended October 31,  
 2017 2016 % Change 2017 2016 % Change
  *As Adjusted   *As Adjusted 
Revenues:           
Subscription services$463,568
 $337,910
 37% $1,297,831
 $924,148
 40%
Professional services91,821
 75,612
 21% 262,739
 210,708
 25%
Total revenues$555,389
 $413,522
 34% $1,560,570
 $1,134,856
 38%
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Total revenues were $555 million$1.1 billion for the three months ended October 31, 2017,2020, compared to $414$938 million during the prior year period, an increase of $141$168 million, or 34%18%. Subscription services revenues were $464revenue was $969 million for the three months ended October 31, 2017,2020, compared to $338$799 million for the prior year period, an increase of $126$170 million, or 37%21%. The increase in subscription services revenuesrevenue was due primarily to an increased number of customer contracts as compared to the prior year period. Professional services revenues were $92revenue was $137 million for the three months ended October 31, 2017,2020, compared to $76$140 million for the prior year period, an increasea decrease of $16$3 million, or 21%. The increase2%, which was primarily due to a decrease in professional services revenues was due primarily totraining revenue as a result of the additionCOVID-19 pandemic.
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Table of new customers and a greater number of customers requesting deployment and integration services.Contents
Total revenues were $1.6$3.2 billion for the nine months ended October 31, 2017,2020, compared to $1.1$2.7 billion during the prior year period, an increase of $426 million,$0.5 billion, or 38%20%. Subscription services revenues were $1.3revenue was $2.8 billion for the nine months ended October 31, 2017,2020, compared to $924 million$2.3 billion for the prior year period, an increase of $374 million,$0.5 billion, or 40%23%. The increase in subscription services revenuesrevenue was due primarily to an increased number of customer contracts as compared to the prior year period. Professional services revenues were $263revenue was $404 million for the nine months ended October 31, 2017,2020, compared to $211$394 million for the prior year period, an increase of $52$10 million, or 25%3%. The increase in professional services revenuesrevenue was due primarily to the addition of new customersWorkday performing deployment and integration services for a greater number of customers requesting deployment and integration services.than in the prior year period.
Operating Expenses
GAAP operating expenses were $635 million$1.1 billion for the three months ended October 31, 2017,2020, compared to $519 million for the prior year period, an increase of $116 million, or 22%. The increase was primarily due to increases of $83 million in employee-related costs driven by higher headcount, $8 million in service contracts expense to expand data center capacity, $7 million in depreciation and amortization expense, and $6 million in facility and IT-related expenses.
GAAP operating expenses were $1.8 billion for the nine months ended October 31, 2017, compared to $1.4$1.0 billion for the prior year period, an increase of $0.4 billion,$72 million, or 27%7%. The increase was primarily due to increasesin GAAP operating expenses included an increase of $0.3 billion$83 million in employee-related costsexpense driven by higher headcount, and $0.1partially offset by a decrease of $26 million in reduced travel expenses due to the COVID-19 pandemic.
GAAP operating expenses were $3.4 billion for the nine months ended October 31, 2020, compared to $3.0 billion for the prior year period, an increase of $355 million, or 12%. The increase in GAAP operating expenses included increases of $288 million in employee-related expenses driven by higher headcount, $79 million related to depreciation, amortization, service contractsa one-time cash bonus paid to expandnon-executive employees in the first quarter of fiscal 2021 to help accommodate unforeseen costs brought on by the COVID-19 pandemic (“COVID-19 one-time employee bonus”), $38 million in facilities and IT related expenses, and $21 million in third-party expenses for hardware maintenance and data center capacity, facilities and IT.

partially offset by a decrease of $72 million in reduced travel expenses.
We use the non-GAAP financial measure of non-GAAP operating expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance and the ability of operations to generate cash.performance. See “Non-GAAP Financial Measures” below for further information. We believe that non-GAAP operating expenses reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business, as they exclude expenses that are not reflective of ongoing operating results.business. We also believe that non-GAAP operating expenses provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
Non-GAAP operating expenses are calculated by excluding share-based compensation expenses, and certain other expenses, which consist of employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets.
Non-GAAP operating expenses were $505$838 million for the three months ended October 31, 2017,2020, compared to $406$795 million for the prior year period, an increase of $99$43 million, or 24%5%. The increase was primarily due to increasesin Non-GAAP operating expenses included an increase of $66$52 million in employee-related costsexpenses driven by higher headcount, $8partially offset by a decrease of $26 million in service contracts expensereduced travel expenses due to expand data center capacity, $7 million in depreciation and amortization expense, and $6 million in facility and IT-related expenses.the COVID-19 pandemic.
Non-GAAP operating expenses were $1.4$2.5 billion for the nine months ended October 31, 2017,2020, compared to $1.1$2.3 billion for the prior year period, an increase of $0.3 billion,$247 million, or 26%11%. The increase was primarily due toin Non-GAAP operating expenses included increases of $0.2 billion$171 million in employee-related costsexpenses driven by higher headcount, and $0.1 billion in expenses$79 million related to service contracts to expandthe COVID-19 one-time employee bonus, $38 million in facilities and IT related expenses, and $21 million in third-party expenses for hardware maintenance and data center capacity, depreciation, amortization, facilities and IT.partially offset by a decrease of $72 million in reduced travel expenses.
Reconciliations of our GAAP to non-GAAP operating expenses were as follows (in thousands):
 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 services142,785 (27,349)(824)114,612 
Product development419,962 (128,423)(4,006)287,533 
Sales and marketing302,870 (54,077)(8,352)240,441 
General and administrative102,024 (33,216)(1,355)67,453 
Total costs and expenses$1,120,037 $(259,832)$(22,348)$837,857 
 Three Months Ended October 31, 2017
 
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
Costs of subscription services$71,898
 $(6,899) $(2,468) $62,531
Costs of professional services91,657
 (9,956) (200) 81,501
Product development239,588
 (59,116) (3,780) 176,692
Sales and marketing176,121
 (25,517) (598) 150,006
General and administrative56,184
 (20,991) (683) 34,510
Total costs and expenses$635,448
 $(122,479) $(7,729) $505,240

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Table of Contents
Three Months Ended October 31, 2016
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
Three Months Ended October 31, 2019
 *As AdjustedGAAP Operating Expenses
Share-Based Compensation Expenses (1)
Other Operating Expenses (2)
Non-GAAP Operating Expenses (3)
Costs of subscription services$54,645
 $(5,472) $(118) $49,055
Costs of subscription services$122,305 $(13,634)$(7,593)$101,078 
Costs of professional services72,240
 (7,436) (171) 64,633
Costs of professional services148,625 (22,249)(569)125,807 
Product development185,311
 (45,968) (5,792) 133,551
Product development401,742 (118,215)(4,420)279,107 
Sales and marketing149,537
 (22,597) (661) 126,279
Sales and marketing286,794 (47,142)(7,820)231,832 
General and administrative57,721
 (24,982) (713) 32,026
General and administrative88,884 (29,762)(1,453)57,669 
Total costs and expenses$519,454
 $(106,455) $(7,455) $405,544
Total costs and expenses$1,048,350 $(231,002)$(21,855)$795,493 

Nine Months Ended October 31, 2017Nine Months Ended October 31, 2020
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
GAAP Operating Expenses
Share-Based Compensation Expenses (1)
Other Operating Expenses (2)
Non-GAAP Operating Expenses (3)
Costs of subscription services$197,627
 $(19,170) $(3,222) $175,235
Costs of subscription services$442,666 $(45,484)$(26,298)$370,884 
Costs of professional services260,834
 (27,278) (1,485) 232,071
Costs of professional services442,422 (74,467)(4,843)363,112 
Product development657,130
 (167,068) (19,344) 470,718
Product development1,282,127 (378,950)(20,710)882,467 
Sales and marketing503,782
 (74,618) (3,398) 425,766
Sales and marketing897,924 (150,881)(26,841)720,202 
General and administrative163,085
 (63,656) (2,755) 96,674
General and administrative296,461 (97,958)(5,111)193,392 
Total costs and expenses$1,782,458
 $(351,790) $(30,204) $1,400,464
Total costs and expenses$3,361,600 $(747,740)$(83,803)$2,530,057 


 Nine Months Ended October 31, 2019
 GAAP Operating Expenses
Share-Based Compensation Expenses (1)
Other Operating Expenses (2)
Non-GAAP Operating Expenses (3)
Costs of subscription services$355,935 $(36,050)$(31,992)$287,893 
Costs of professional services424,548 (57,390)(5,261)361,897 
Product development1,127,695 (315,210)(23,431)789,054 
Sales and marketing839,930 (128,686)(31,103)680,141 
General and administrative258,932 (88,122)(6,772)164,038 
Total costs and expenses$3,007,040 $(625,458)$(98,559)$2,283,023 
 Nine Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
    *As Adjusted
Costs of subscription services$155,224
 $(14,837) $(570) $139,817
Costs of professional services198,140
 (18,698) (887) 178,555
Product development488,975
 (117,250) (12,152) 359,573
Sales and marketing412,055
 (62,443) (2,458) 347,154
General and administrative144,609
 (59,684) (2,449) 82,476
Total costs and expenses$1,399,003
 $(272,912) $(18,516) $1,107,575
(1)Share-based compensation expenses were $260 million and $231 million for the three months ended October 31, 2020, and 2019, respectively, and $748 million and $625 million for the nine months ended October 31, 2020, and 2019, respectively. The increase in share-based compensation expenses includes the impact of restricted stock units (“RSUs”) granted to existing and new employees.
(1)
(2)Other operating expenses include employer payroll tax-related items on employee stock transactions of $8 million and $6 million for the three months ended October 31, 2020, and 2019, respectively, and $38 million and $44 million for the nine months ended October 31, 2020, and 2019, respectively. In addition, other operating expenses include amortization of acquisition-related intangible assets of $14 million and $16 million for the three months ended October 31, 2020, and 2019, respectively and $46 million and $55 million for the nine months ended October 31, 2020, and 2019, respectively.
(3)See “Non-GAAP Financial Measures” below for further information.
Share-based compensation expenses were $122 million and $106 million for the three months ended October 31, 2017 and 2016, respectively, and $352 million and $273 million for the nine months ended October 31, 2017 and 2016, respectively. The increase in share-based compensation expenses was primarily due to grants of RSUs to existing and new employees.
(2)
Other operating expenses include employer payroll tax-related items on employee stock transactions of $3 million for each of the three month periods ended October 31, 2017 and 2016, respectively, and $16 million and $11 million for the nine months ended October 31, 2017 and 2016, respectively. In addition, other operating expenses included amortization of acquisition-related intangible assets of $4 million and $5 million for the three months ended October 31, 2017 and 2016, respectively, and $14 million and $8 million for the nine months ended October 31, 2017 and 2016, respectively.
(3)
See "Non-GAAP Financial Measures" below for further information.
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Costs of Subscription Services
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in costs of subscription services were $72$152 million for the three months ended October 31, 2017,2020, compared to $55$122 million for the prior year period, an increase of $17$30 million, or 31%25%. The increase was primarily due toin costs of subscription services included increases of $7 million in depreciation expense related to our data centers, $6$8 million in employee-related costsexpenses driven by higher headcount, and $2$6 million in facilitydepreciation expenses related to equipment in our data centers, and IT-related expenses.$6 million in third-party expenses for hardware maintenance and data center capacity.
GAAP operating expenses in costs of subscription services were $198$443 million for the nine months ended October 31, 2017,2020, compared to $155$356 million for the prior year period, an increase of $43$87 million, or 28%24%. The increase was primarily due toin costs of subscription services included increases of $16$23 million in employee-related expenses driven by higher headcount, $18 million in depreciation expense related to equipment in our data centers, $16$17 million in employee-related costs driven by higher headcount,third-party expenses for hardware maintenance and $7data center capacity, and $5 million in facility and IT-related expenses.related to the COVID-19 one-time employee bonus.
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Non-GAAP operating expenses in costs of subscription services were $63$128 million for the three months ended October 31, 2017,2020, compared to $49$101 million for the prior year period, an increase of $14$27 million, or 29%26%. The increase was primarily duein costs of subscription services included increases of $6 million in depreciation expenses related to increases ofequipment in our data centers, $6 million in third-party expenses for hardware maintenance and data center capacity, and $5 million in depreciation expense related to our data centers, $4 million in employee-related costsexpenses driven by higher headcount, and $2 million in facility and IT-related expenses.headcount.
Non-GAAP operating expenses in costs of subscription services were $175$371 million for the nine months ended October 31, 2017,2020, compared to $140$288 million for the prior year period, an increase of $35$83 million, or 25%29%. The increase was primarily due toin costs of subscription services included increases of $14$18 million in depreciation expense related to equipment in our data centers, $11$17 million in third-party expenses for hardware maintenance and data center capacity, $14 million in employee-related costsexpenses driven by higher headcount, and $7$5 million in facility and IT-related expenses.related to the COVID-19 one-time employee bonus.
We expect that GAAP and non-GAAP operating expenses in costs of subscription services will continue to increase in absolute dollars as we improve and expand our data center capacity and operations.
Costs of Professional Services
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in costs of professional services were $92$143 million for the three months ended October 31, 2017,2020, compared to $72$149 million for the prior year period, an increasea decrease of $20$6 million, or 28%4%. The increase was primarilydecrease in costs of professional services included $4 million in reduced travel expenses due to additional costs of $16 million to staff our deploymentthe COVID-19 pandemic and integration engagements and $2$4 million in facility and IT-related expensesreduced subcontractor expenses.
GAAP operating expenses in costs of professional services were $261$442 million for the nine months ended October 31, 2017,2020, compared to $198 million for the prior year period, an increase of $63 million, or 32%. The increase was primarily due to additional costs of $52 million to staff our deployment and integration engagements and $5 million in facility and IT-related expenses.

Non-GAAP operating expenses in costs of professional services were $82 million for the three months ended October 31, 2017, compared to $65$425 million for the prior year period, an increase of $17 million, or 26%4%. The increase was primarily duein costs of professional services included increases of $21 million in employee-related expenses driven by higher headcount and $12 million related to additional coststhe COVID-19 one-time employee bonus, partially offset by a decrease of $13 million to staff our deployment and integration engagements and $2 million in facility and IT-relatedreduced travel expenses.
Non-GAAP operating expenses in costs of professional services were $232$115 million for the three months ended October 31, 2020, compared to $126 million for the prior year period, a decrease of $11 million, or 9%. The decrease in costs of professional services included decreases of $4 million in reduced travel expenses due to the COVID-19 pandemic and $4 million in reduced subcontractor expenses.
Non-GAAP operating expenses in costs of professional services were $363 million for the nine months ended October 31, 2017,2020, compared to $179$362 million for the prior year period, an increase of $53$1 million, or 30%0.3%. The increase was primarily due to additionalin costs of $43professional services included increases of $12 million related to staff our deployment and integration engagementsthe COVID-19 one-time employee bonus, and $5 million in facility and IT-relatedemployee-related expenses driven by higher headcount, partially offset by a decrease of $13 million in reduced travel expenses.
Going forward, weWe expect GAAP and non-GAAP costs of professional services as a percentage of total revenues to continue to decline as we increasinglycontinue to rely on our service partners to deploy our applications and as the number of our customers continues to grow. For fiscal 2018, we anticipate GAAP and non-GAAP professional services margins to be lower than fiscal 2017 as we invest in programs to ensure ongoing customer success.
Product Development
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in product development were $240$420 million for the three months ended October 31, 2017,2020, compared to $185$402 million for the prior year period, an increase of $55$18 million, or 30%5%. The increase was primarily due to increasesin product development expenses included an increase of $43$22 million in employee-related costsexpenses driven by higher headcount, and $8partially offset by a decrease of $5 million in facility and IT-related expenses.reduced travel expenses due to the COVID-19 pandemic.
GAAP operating expenses in product development were $657 million$1.3 billion for the nine months ended October 31, 2017,2020, compared to $489$1.1 billion for the prior year period, an increase of $154 million, or 14%. The increase in product development included increases of $119 million in employee-related expenses driven by higher headcount and $31 million related to the COVID-19 one-time employee bonus.
Non-GAAP operating expenses in product development were $288 million for the three months ended October 31, 2020, compared to $279 million for the prior year period, an increase of $168$9 million, or 34%3%. The increase was primarily due to increasesin product development expenses included an increase of $131$12 million in employee-related costsexpenses driven by higher headcount, and $22partially offset by a decrease of $5 million in facility and IT-relatedreduced travel expenses.
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Non-GAAP operating expenses in product development were $177$882 million for the threenine months ended October 31, 2017,2020, compared to $134$789 million for the prior year period, an increase of $43$93 million, or 32%12%. The increase was primarily due toin product development expenses included increases of $29$57 million in employee-related costsexpenses driven by higher headcount and $8$31 million in facility and IT-related expenses.
Non-GAAP operating expenses in product development were $471 million forrelated to the nine months ended October 31, 2017, compared to $360 million for the prior year period, an increase of $111 million, or 31%. The increase was primarily due to increases of $78 million in employee-related costs driven by higher headcount and $22 million in facility and IT-related expenses.COVID-19 one-time employee bonus.
We expect that GAAP and non-GAAP product development expenses will continue to increase in absolute dollars as we improve and expandextend our applications and develop new technologies.
Sales and Marketing
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in sales and marketing were $176$303 million for the three months ended October 31, 2017,2020, compared to $150$287 million for the prior year period, an increase of $26$16 million, or 17%6%. The increase was primarily due toin sales and marketing expenses included increases of $18$25 million in employee-related costsexpenses driven by higher headcount and higher commissionable sales volume, $5$4 million in advertising,related to marketing and event costs, and $3spending, partially offset by a decrease of $15 million in facility and IT-related expenses.reduced travel expenses due to the COVID-19 pandemic.
GAAP operating expenses in sales and marketing were $504$898 million for the nine months ended October 31, 2017,2020, compared to $412$840 million for the prior year period, an increase of $92$58 million, or 22%7%. The increase was primarily due toin sales and marketing expenses included increases of $69$66 million in employee-related costsexpenses driven by higher headcount and higher commissionable sales volume, $11$25 million related to the COVID-19 one-time employee bonus, partially offset by a decrease of $40 million in advertising, marketing and event costs, and $7 million in facility and IT-relatedreduced travel expenses.
Non-GAAP operating expenses in sales and marketing were $150$240 million for the three months ended October 31, 2017,2020, compared to $126$232 million for the prior year period, an increase of $24$8 million, or 19%4%. The increase was primarily due toin sales and marketing expenses included increases of $15$16 million in employee-related costsexpenses driven by higher headcount and higher commissionable sales volume, $5$4 million in advertising,related to marketing and event costs, and $3spending, partially offset by a decrease of $15 million in facility and IT-relatedreduced travel expenses.
Non-GAAP operating expenses in sales and marketing were $426$720 million for the nine months ended October 31, 2017,2020, compared to $347$680 million for the prior year period, an increase of $79$40 million, or 23%6%. The increase was primarily due toin sales and marketing expenses included increases of $56$45 million in employee-related costsexpenses driven by higher headcount and higher commissionable sales volume, $11$25 million related to the COVID-19 one-time employee bonus, partially offset by a decrease of $40 million in advertising, marketing and event costs, and $7 million in facility and IT-relatedreduced travel expenses.
We expect that GAAP and non-GAAP sales and marketing expenses will continue to increase in absolute dollars as we continue to invest in the expansion of our domestic and international selling and marketing activities to buildexpand brand awareness and attract new customers.

General and Administrative
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in general and administrative were $56$102 million for the three months ended October 31, 2017,2020, compared to $89 million for the prior year period, an increase of $13 million, or 15%. The increase in general and administrative expenses included increases of $10 million in employee-related expenses driven by higher headcount and $8 million in charitable donations, partially offset by moderation of operating expenses due to the COVID-19 pandemic.
GAAP operating expenses in general and administrative were $296 million for the nine months ended October 31, 2020, compared to $259 million for the prior year period, an increase of $37 million, or 14%. The increase in general and administrative expenses included increases of $26 million in employee-related expenses driven by higher headcount, $12 million in charitable donations, and $6 million related to the COVID-19 one-time employee bonus, partially offset by a decrease of $5 million in reduced travel expenses.
Non-GAAP operating expenses in general and administrative were $67 million for the three months ended October 31, 2020, compared to $58 million for the prior year period, a decreasean increase of $2$9 million, or 3%17%. The decrease was primarily due to a one-time acquisition expenseincrease in general and administrative expenses included increases of $6 million recorded in the third quarter of fiscal 2017 for which there was no corresponding amount in fiscal 2018, offset by $5$8 million in additionalcharitable donations, and $7 million in employee-related costsexpenses driven by higher headcount, and $2 million in higher professional fees.partially offset by moderation of operating expenses.
GAAPNon-GAAP operating expenses in general and administrative were $163$193 million for the nine months ended October 31, 2017,2020, compared to $145$164 million for the prior year period, an increase of $18 million, or 12%. The increase was primarily due to $20 million in additional employee-related costs driven by higher headcount and $5 million in higher professional fees, offset by a one-time acquisition expense of $6 million recorded in the third quarter of fiscal 2017.
Non-GAAP operating expenses in general and administrative were $35 million for the three months ended October 31, 2017, compared to $32 million for the prior year period, an increase of $3 million, or 9%. The increase was primarily due to $3 million in additional employee-related costs driven by higher headcount.
Non-GAAP operating expenses in general and administrative were $97 million for the nine months ended October 31, 2017, compared to $82 million for the prior year period, an increase of $15$29 million, or 18%. The increase was primarily due to $10in general and administrative expenses included increases of $18 million in additional employee-related costsexpenses driven by higher headcount, $12 million in charitable donations, and $6 million related to the COVID-19 one-time employee bonus, partially offset by a decrease of $5 million in higher professional fees.reduced travel expenses.
We expect GAAP and non-GAAP general and administrative expenses will continue to increase in absolute dollars as we further invest in our infrastructure and support our global expansion.
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Operating Margins
GAAP operating margins improved from (26)(11.8)% for the three months ended October 31, 20162019, to (14)(1.3)% for the three months ended October 31, 2017. The improvements in our2020. Our GAAP operating margins infor the three months ended October 31, 2017 were primarily due2020, have been favorably impacted by our revenue growth outpacing headcount growth as well as moderation of operating expenses in response to higher subscription services revenues, higher professional services revenues, and improvements in operating leverage.the COVID-19 pandemic, including reduced travel.
GAAP operating margins improved from (23)(13.4)% for the nine months ended October 31, 20162019, to (14)(5.5)% for the nine months ended October 31, 2017. The improvements in our2020. Our GAAP operating margins infor the nine months ended October 31, 2017 were primarily due2020, have been favorably impacted by our revenue growth outpacing headcount growth as well as moderation of operating expenses in response to higher subscription services revenues, higher professional services revenues,the COVID-19 pandemic, including reduced travel and improvements in operating leverage.marketing and event spending.
We use the non-GAAP financial measure of non-GAAP operating margins to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance and the ability of operations to generate cash.performance. We believe that non-GAAP operating margins reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business, as they exclude expenses that are not reflective of ongoing operating results.business. We also believe that non-GAAP operating margins provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
Non-GAAP operating margins are calculated using GAAP revenues and non-GAAP operating expenses. See "Non-GAAP“Non-GAAP Financial Measures"Measures” below for further information.
Non-GAAP operating margins improved from 2%15.2% for the three months ended October 31, 20162019, to 9%24.2% for the three months ended October 31, 2017. The improvements in our2020. Our non-GAAP operating margins infor the three months ended October 31, 2017 were primarily due2020, have been favorably impacted by our revenue growth outpacing headcount growth as well as moderation of operating expenses in response to higher subscription services revenues, higher professional services revenues, and improvements in operating leverage.the COVID-19 pandemic, including reduced travel.
Non-GAAP operating margins improved from 2%13.9% for the nine months ended October 31, 20162019, to 10%20.6% for the nine months ended October 31, 2017. The improvements in our2020. Our non-GAAP operating margins infor the nine months ended October 31, 2017 were primarily due2020, have been favorably impacted by our revenue growth outpacing headcount growth as well as moderation of operating expenses in response to higher subscription services revenues, higher professional services revenues,the COVID-19 pandemic, including reduced travel and improvements in operating leverage.

marketing and event spending.
Reconciliations of our GAAP to non-GAAP operating margins were as follows:
 Three Months Ended October 31, 2020
 GAAP Operating ExpensesShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP Operating Expenses (1)
Operating margin(1.3)%23.5%2.0%24.2%
 Three Months Ended October 31, 2017
 
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)
Operating margin(14.4)% 22.1% 1.3% 9.0%

Three Months Ended October 31, 2019
GAAP Operating ExpensesShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP Operating Expenses (1)
Operating margin(11.8)%24.6%2.4%15.2%

Nine Months Ended October 31, 2020
GAAP Operating ExpensesShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP Operating Expenses (1)
Operating margin(5.5)%23.5%2.6%20.6%

Nine Months Ended October 31, 2019
GAAP Operating ExpensesShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP Operating Expenses (1)
Operating margin(13.4)%23.6%3.7%13.9%
(1)See “Non-GAAP Financial Measures” below for further information.
35
 Three Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)

    *As Adjusted
Operating margin(25.6)% 25.7% 1.8% 1.9%
Table of Contents
 Nine Months Ended October 31, 2017
 
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)
Operating margin(14.2)% 22.5% 2.0% 10.3%
 Nine Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)

    *As Adjusted
Operating margin(23.3)% 24.0% 1.7% 2.4%
(1)
See "Non-GAAP Financial Measures" below for further information.
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Other Income (Expense), Net
Other expense, net increased $1was $9 million for the three months ended October 31, 20172020, as compared to other expense, net of $4 million for the prior year period. The increase was primarily due to interestin other expense, of $5net included a $7 million related to the 0.25% convertible senior notes issued in the current fiscal quarter, offset by an increasereduction in interest income on marketable securities as a result of lower prevailing interest rates during the three months ended October 31, 2020, partially offset by a $4 million.million unrealized gain on an equity investment.
Other income,expense, net increased $26was $31 million for the nine months ended October 31, 20172020, as compared to other income, net of $3 million for the prior year period. The increaseDuring the nine months ended October 31, 2020, there was primarilya $16 million decrease in interest income on marketable securities as a result of lower prevailing interest rates. Additionally, during the nine months ended October 31, 2019, there was a $15 million impairmentgain from the sale of a cost methodmarketable equity investment recorded in the second quarter of fiscal 2017 for$7 million and capitalized interest costs of $6 million, which there was no corresponding amount in fiscal 2018, and an increase inreduced interest income of $8 million.expense.
Liquidity and Capital Resources
As of October 31, 2017,2020, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $3.2$2.9 billion, which were primarily held for working capital purposes. Our cash equivalents and marketable securities are comprisedcomposed primarily of U.S. treasury securities, U.S. agency obligations, U.S. treasury securities, corporate bonds, commercial paper, and money market funds,funds.
In April 2020, we entered into a credit agreement (“Credit Agreement”) pursuant to which the lenders would extend to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million (“Term Loan”) and certificatesan unsecured revolving credit facility in an aggregate principal amount of deposit.$750 million (“Revolving Credit Facility”). On April 2, 2020, $500 million of the Term Loan was funded, and the remaining $250 million of the Term Loan was funded on July 13, 2020. We can also borrow up to $750 million under the Revolving Credit Facility until April 2, 2025. For further information, see Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The 2022 Notes are convertible at the option of the holders during the fourth quarter of fiscal 2021, since the trigger for early conversion was met. Specifically, the last reported sale price of our Class A common stock exceeded 130% of the conversion price of the 2022 Notes for more than 20 trading days during the 30 consecutive trading days ended October 31, 2020. The 2022 Notes were reclassified to current liabilities on the condensed consolidated balance sheet as of October 31, 2020. From November 1, 2020, through the date of this filing, the amount of the principal balance of the 2022 Notes that has been converted or for which conversion has been requested was not material.
We have financed our operations primarily through customer payments, issuance of debt, and sales of equity securities, customer payments, and issuance of debt.securities. Our long-term future capital requirements will depend on many factors, including our customer growth rate,rates, subscription renewal activity, the timing of construction of facilities in Pleasanton, California and the acquisition of additional facilities, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptancetiming of our services,construction or acquisition of additional facilities, investments, and acquisition activities. We may enter into arrangements to acquire or invest in complementary businesses, services, and technologies, or intellectual property rights in the future. We also may choose to seek additional equitydebt or debtequity financing.

Our cash flows for the three and nine months ended October 31, 20172020, and 20162019, were as follows (in thousands):
Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016 Three Months Ended October 31,Nine Months Ended October 31,
 *As Adjusted *As Adjusted 2020201920202019
Net cash provided by (used in):       Net cash provided by (used in):
Operating activities$144,031
 $71,556
 $339,179
 $240,895
Operating activities$293,802 $258,002 $714,695 $567,484 
Investing activities(595,458) (99,120) (617,002) (187,243)Investing activities(462,666)32,559 (942,651)(355,541)
Financing activities1,039,314
 4,926
 1,073,765
 34,273
Financing activities(5,906)1,602 564,205 62,915 
Effect of exchange rate changes(322) (137) 261
 357
Effect of exchange rate changes40 48 546 (204)
Net increase (decrease) in cash, cash equivalents and restricted cash$587,565
 $(22,775) $796,203
 $88,282
Net increase (decrease) in cash, cash equivalents, and restricted cashNet increase (decrease) in cash, cash equivalents, and restricted cash$(174,730)$292,211 $336,795 $274,654 
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Operating Activities
Cash provided by operating activities was $144$294 million and $72$258 million for the three months ended October 31, 20172020, and 2016,2019, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections, and moderation of operating expenses in response to the COVID-19 pandemic, partially offset by higher cash operating expenses driven by increased headcount.
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Cash provided by operating activities was $339$715 million and $241$567 million for the nine months ended October 31, 20172020, and 2016,2019, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections, and moderation of operating expenses in response to the COVID-19 pandemic, partially offset by higher cash operating expenses driven by increased headcount.headcount and the COVID-19 one-time employee bonus.
We expect our business to continue to generate sufficient operating cash flows; however, if the COVID-19 pandemic worsens or is prolonged, our customers may continue to request payment timing concessions, which could materially impact the timing and predictability of our operating cash flows in any given period.
Investing Activities
Cash used in investing activities for the three months ended October 31, 20172020, was $595$463 million, which was primarily the result of the timing ofdue to a net cash outflow related to purchases and maturities of marketable securities capital expenditures for owned real estate projects, including construction of our new customer briefing and development center ("development center") of $28 million, capital expenditures for data center and office space projects of $36 million, and the purchase of cost method investments of $5 million. These payments were partially offset by proceeds of $33 million from the sale of available-for-sale securities.
Cash used in investing activities for the three months ended October 31, 2016 was $99 million, which was primarily the result of timing of purchase and maturities of marketable securities, a net cash outflow of $144 million related to an acquisition, the purchase of an office building and land in Pleasanton, California for $47 million, capital expenditures for owned real estate projects (including construction of our development center) of $13$379 million and capital expenditures for data center and office space projects of $28$78 million. These payments were
Cash provided by investing activities for the three months ended October 31, 2019, was $33 million, which was primarily due to a net cash inflow related to purchases and maturities of marketable securities of $119 million, partially offset by proceedscapital expenditures for data center and office space projects of $63$55 million, from the salecapital expenditures related to owned real estate projects of available-for-sale securities.$22 million, and purchases of non-marketable equity and other investments of $10 million.
Cash used in investing activities for the nine months ended October 31, 20172020, was $617$943 million, which was primarily the result of the timing ofdue to a net cash outflow related to purchases and maturities of marketable securities capital expenditures for owned real estate projects (including construction of our development center) of $80$681 million, capital expenditures for data center and office space projects of $105$205 million, and the purchasepurchases of cost methodnon-marketable equity and other investments of $11$63 million. These payments were partially offset by proceeds of $223 million from the sale of available-for-sale securities.
Cash used in investing activities for the nine months ended October 31, 20162019, was $187$356 million, which was primarily the result of timing of purchase and maturities of marketable securities, a net cash outflow of $148 million related to acquisitions, purchases of office buildings and land in Pleasanton, California for $62 million, capital expenditures for owned real estate projects (including construction of our development center) of $23 million, and capital expenditures for data center and office space projects of $196 million, capital expenditures related to owned real estate projects of $96 million, purchases of non-marketable equity and other investments of $17 million, net cash outflows related to purchases net of maturities of marketable securities of $89 million, and acquisition activity of $13 million. These payments were partially offset by proceeds of $92$55 million from the salesales of available-for-salemarketable securities.

We expect capital expenditures related to owned real estate projects, including construction of our development center, will be approximately $130 million for fiscal 2018. We expect capital expenditures, excluding owned real estate projects, will be approximately $160$280 million for fiscal 2018. We expect that these2021. These capital outlays will largely be used to expand the infrastructure of our data centers andcenters. We do not expect to build outmake additional office space to support our growth.investments in owned real estate projects during fiscal 2021.
Financing Activities
Cash provided byused in financing activities was $6 million for the three months ended October 31, 20172020, which was $1.0 billion, which wasprimarily due to a payment on the issuanceTerm Loan of $1.15 billion principal amount$9 million, partially offset by proceeds of 0.25% convertible senior notes due October 1, 2022, net of issuance costs of $18$4 million and the related sale of warrants for $81 million and purchase of note hedges for $176 million. For further information, see Note 10 of the notes to condensed consolidated financial statements. In addition, cash flows from financing activities included $2 million of proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities was $2 million for the three months ended October 31, 2016 was $5 million,2019, which was primarily due to proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities was $564 million for the nine months ended October 31, 20172020, which was $1.1 billion, which wasprimarily due to proceeds of $748 million from borrowing on the issuance of $1.15 billion principal amount of 0.25% convertible senior notes due October 1, 2022, net of issuance costs of $18Term Loan and $78 million and the related sale of warrants for $81 million and purchase of note hedges for $176 million. For further information, see Note 10 of the notes to condensed consolidated financial statements. In addition, cash flows from financing activities included $37 million of proceeds from the issuance of common stock from employee equity plans.plans, partially offset by the principal payment of $250 million in connection with the conversion of the 2020 Notes.
Cash provided by financing activities was $63 million for the nine months ended October 31, 2016 was $34 million,2019, which was primarily due to proceeds from the issuance of common stock from employee equity plans.
Free Cash Flows
In evaluating our performance internally, we focus on long-term, sustainable growth in free cash flows. We define free cash flows, a non-GAAP financial measure, as net cash provided by (used in) operating activities minus capital expenditures (excluding owned real estate projects). See "Non-GAAP Financial Measures" below for further information.
Free cash flows improved by $64 million to $108 million for the three months ended October 31, 2017, compared to $44 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections, partially offset by increases in capital expenditures (excluding owned real estate projects) and higher operating expenses driven by increased headcount.
Free cash flows improved by $82 million to $234 million for the nine months ended October 31, 2017, compared to $152 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections, partially offset by increases in capital expenditures (excluding owned real estate projects) and higher operating expenses driven by increased headcount.
Reconciliations of Net cash provided by (used in) operating activities to free cash flows were as follows (in thousands):
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 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Net cash provided by (used in) operating activities$144,031
 $71,556
 $339,179
 $240,895
Capital expenditures, excluding owned real estate projects(36,356) (27,518) (105,477) (88,535)
Free cash flows$107,675
 $44,038
 $233,702
 $152,360
        
        
 Trailing Twelve Months Ended October 31,    
 2017 2016    
  *As Adjusted    
Net cash provided by (used in) operating activities$448,910
 $339,386
    
Capital expenditures, excluding owned real estate projects(137,755) (130,520)    
Free cash flows$311,155
 $208,866
    
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.

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Non-GAAP Financial Measures
Regulation S-K Item 10(e), "Use“Use of non-GAAP financial measures in Commission filings,"” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating expenses and non-GAAP operating margin and free cash flows eachmargins meet the definition of a non-GAAP financial measure.
Non-GAAP Operating Expenses and non-GAAPNon-GAAP Operating Margins
We defineOur non-GAAP operating expenses as our total operating expenses excluding the following components, which we believe are not reflective of our ongoing operational expenses. Similarly, the same components are also excluded from the calculation ofand non-GAAP operating margins. In each case, formargins exclude the components listed below. For the reasons set forth below, management believes that excluding the component provides useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business.
•Share-Based Compensation Expenses. Although share-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude share-based compensation expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. For restrictedShare-based compensation expenses are determined using a number of factors, including our stock unit awards, the amount ofprice, volatility, and forfeiture rates that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses isare not reflective of the value ultimately received by the grant recipients. Moreover, determining the fair value of certain of the share-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards. Unlike cash compensation, the value of stock options and shares offered under the ESPP, which are elements of our ongoing share-based compensation expenses, is determined using a complex formula that incorporates factors, such as market volatility and forfeiture rates, that are beyond our control.
•Other Operating Expenses. Other operating expenses includeincludes employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus we do not believe it is reflective of our ongoing operations.
Free Cash Flows
We define free cash flows as net cash provided by (used in) operating activities minus capital expenditures (excluding owned real estate projects). Capital expenditures deducted from cash flows from operations do not include purchases of land and buildings, and construction costs of our new development center and of other owned buildings. We exclude these owned real estate projects as they are infrequent in nature. For the current fiscal year, these costs primarily represent the construction of our new development center, which is anticipated to be completed in fiscal 2020. We use free cash flows as a measure of financial progress in our business, as it balances operating results, cash management and capital efficiency. We believe information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.
Limitations on the Use of Non-GAAP Financial Measures
A limitation of our non-GAAP financial measures of non-GAAP operating expenses and non-GAAP operating margin and free cash flowsmargins is that they do not have uniform definitions. Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, ourFurther, the non-GAAP financial measuresmeasure of non-GAAP operating expenses non-GAAPhas certain limitations because it does not reflect all items of expense that affect our operations and are reflected in the GAAP financial measure of total operating margin and free cash flows should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. Additionally, inexpenses. In the case of share-based compensation, if we did not pay out a portion of compensation in the form of share-based compensation and related employer payroll tax-related items, the cash salary expense included in costs of revenues and operating expenses would be higher, which would affect our cash position. Further, the non-GAAP financial measure of non-GAAP operating expenses has certain limitations because it does not reflect all items of expense that affect our operations and are reflected in the GAAP financial measure of total operating expenses.

We compensate for these limitations by reconciling GAAP tothe non-GAAP financial measures and reviewing these measures in conjunction withto the most comparable GAAP financial information.measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.
See Results“Results of Operations—Operating Expenses and Results of Operations—Operating MarginsMargins” for reconciliations from the most directly comparable GAAP financial measures, GAAP operating expenses and GAAP operating margins, to the non-GAAP financial measures, non-GAAP operating expenses and non-GAAP operating margins, for the three and nine months ended October 31, 20172020, and 2016.2019.
See Liquidity and Capital Resources—Free Cash Flows for a reconciliation from the most comparable GAAP financial measure, Net cash provided by (used in) operating activities, to the non-GAAP financial measure, free cash flow, for the three and nine months ended October 31, 2017 and 2016.
Contractual Obligations
Our contractual obligations primarily consist of our convertible senior notes, as well as obligationsborrowings under our Credit Agreement, leases for office space and co-location facilities for data center capacity, and a computingthird-party hosted infrastructure platformplatforms for business operations. As of October 31, 2017, the future non-cancelable minimum payments under operating leasesoperations, and computing infrastructure agreements were $370 million. During the remainder of the year ended January 31, 2018, we anticipate leasing additional office space near our headquarters and in various other locations around the world to support our growth. In addition, our existing lease agreements often provide us with options to renew. We expect our future operating lease obligations will increase as we expand our operations.
We are not required to make principal payments under the Notes prior to maturity. If the Notes are not converted to Class A common stock prior to their maturity dates, we are required to repay $350 million in principal on July 15, 2018, $250 million in principal on July 15, 2020, and $1.15 billion in principal on October 1, 2022. We are also required to make interest payments on a semi-annual basis at the interest rates described in Note 10 of the notes to condensed consolidated financial statements.
In January 2014, we entered into a 95-year lease for a 6.9-acre parcel of land in Pleasanton, California, under which we paid $2 million for base rent from commencement through December 31, 2020. Annual rent payments of $0.2 million plus increases based on increases in the consumer price index begin on January 1, 2021 and continue through the end of the lease. Our new developmentpurchase data center consisting of approximately 410,000 square feet of office space, is being constructed on this property.
equipment. We do not consider outstanding purchase orders to be contractual obligations as they represent authorizations to purchase rather than binding agreements.
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Convertible Senior Notes
In June 2013, we completed an offering of $250 million of 1.50% convertible senior notes due July 15, 2020, which were subsequently converted during the second quarter of fiscal 2021. In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022 (“2022 Notes”). We are not required to make principal payments under the 2022 Notes prior to maturity. If the 2022 Notes are not converted to Class A common stock prior to their maturity dates, we are required to repay $1.15 billion in principal on October 1, 2022. The 2022 Notes are convertible at the option of the holders during the fourth quarter of fiscal 2021. From November 1, 2020, through the date of this filing, the amount of the principal balance of the 2022 Notes that has been converted or for which conversion has been requested was not material. We may receive additional conversion request that require settlement in the fourth quarter of fiscal 2021. We are also required to make interest payments on a semi-annual basis at the interest rates described in Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Credit Agreement
In April 2020, we entered into a credit agreement pursuant to which the lenders extended to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million and an unsecured revolving credit facility in an aggregate principal amount of $750 million. The Term Loan matures on April 2, 2025, and provides for quarterly repayment in installments of the principal amount, beginning October 2020, at a rate of 1.25% of the principal amount per quarter through January 2022, and 2.50% of the principal amount per quarter thereafter. The Revolving Credit Facility may be borrowed, repaid, and reborrowed until April 2, 2025, at which time all amounts borrowed must be repaid. The Term Loan and Revolving Credit Facility bear interest at the interest rates described in Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following table summarizes our contractual cash obligations under the Credit Agreement as of October 31, 2020, and assumes interest rates consistent with those in effect for our Term Loan as of October 31, 2020. There were no outstanding borrowings as of October 31, 2020, under the Revolving Credit Facility.
Payments Due by Period
(in thousands)
TotalRemainder of Fiscal 2021Fiscal 2022 - Fiscal 2023Fiscal 2024 - Fiscal 2025Thereafter
Term Loan$740,625 $9,375 $112,500 $150,000 $468,750 
Interest obligation on Term Loan40,047 3,486 19,410 15,546 1,605 
Total$780,672 $12,861 $131,910 $165,546 $470,355 
Leases
We have entered into operating lease agreements for our office space, data centers, and other property and equipment with various expiration dates. These lease agreements often provide us with an option to renew.
Third-Party Hosted Infrastructure Platforms for Business Operations
We have entered into noncancelable agreements with third-party hosted infrastructure platform vendors with various expiration dates. As of October 31, 2020, future noncancelable minimum payments under these agreements were approximately $445 million.
Data Center Equipment
As of October 31, 2020, we have entered into noncancelable agreements to purchase $79 million of data center equipment during the remainder of fiscal 2021.
Off-Balance Sheet Arrangements
Through October 31, 2017,2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Except forDue to the accounting policies for revenue recognitionCOVID-19 pandemic, there has been uncertainty and deferred commissionsdisruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require further updates to our estimates or judgments or require us to further revise the carrying value of our assets or liabilities as of October 31, 2020. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
During the nine months ended October 31, 2020, there were updated as a result of adopting ASU No. 2014-09, there have been no significant changes to our critical accounting policies and estimates as described in the consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended January 31, 2017,2020, filed with the Securities and Exchange Commission ("SEC"(“SEC”) on March 20, 2017, that have had a material impact on our condensed consolidated financial statements and related notes.3, 2020.
Revenue Recognition
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We derive our revenues primarily from subscription services and professional services. Revenues are recognized when control
Table of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.Contents
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
Subscription Services Revenues
Subscription services revenues primarily consist of fees that provide customers access to one or more of our cloud applications for finance, human resources, and analytics, with routine customer support. Revenue is generally recognized over time 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 non-cancelable.
Professional Services Revenues
Professional services revenues primarily consist of fees for deployment and optimization services, as well as training. The majority of our consulting contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within our contracts.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in Sales and marketing expenses in the accompanying condensed consolidated statements of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The ongoing COVID-19 pandemic has resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk. For further discussion of the potential impacts of the COVID-19 pandemic on our business, operating results, and financial condition, see “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Foreign Currency Exchange Risk
We transact business globally in multiple currencies. As a result, our operating results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of October 31, 2017 and 2016,2020, our most significant currency exposures were the Euro,euro, Canadian dollar, British pound, Australian dollar and CanadianAustralian dollar.
We have a hedging program designedDue to identify material foreign currency exposures, manage these exposures and reduce the potential effects of currency fluctuations through the purchase ofour exposure to market risks that may result from changes in foreign currency exchange contracts.rates, we enter into foreign currency derivative hedging transactions to mitigate these risks. For further information, see Note 9, Derivative Instruments, of the notesNotes to condensed consolidated financial statements.Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Interest Rate SensitivityRisk on our Investments
We had cash, cash equivalents, and marketable securities totaling $3.2$2.9 billion and $1.9 billion as of October 31, 2017,2020, and $2.0 billion as of January 31, 2017.2020, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, U.S. treasury securities, corporate bonds, commercial paper, and money market funds, and certificates of deposit.funds. The cash, cash equivalents, and marketable securities are held primarily for working capital purposes. Our investment portfolios are managed to preserve capital and meet liquidity needs. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of marketabledebt securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our marketable securities as "available for sale," no gains or losses are recognized due to changes in interest rates unless suchOur debt securities are sold prior to maturity or declines inclassified as “available for sale”. When the fair value are determinedof the security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be other-than-temporary.nonrecoverable before the sale of the impaired security, is recognized in the income statement.
An immediate increase of 100-basis100 basis points in interest rates would have resulted in a $10 million and $9$7 million market value reduction in our investment portfolio as of October 31, 20172020, and January 31, 2017, respectively. An immediate decrease of 100-basis points in interest rates would have increased the market value by $10 million and $8 million as of October 31, 2017 and January 31, 2017,2020, respectively. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of
Interest Rate Risk on our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities before maturity.Debt
Market Risk and Market Interest Risk
In June 2013, we issued $350 million of 0.75% convertible senior notes due July 15, 2018 ("2018 Notes") and $250 million of 1.50% convertible senior notes due July 15, 2020 ("2020 Notes"). In September 2017, we issuedcompleted an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022. The 2022 ("2022 Notes" and together with the 2018 Notes and 2020 Notes, referred to as "the Notes"). Holders may convert the Notes prior to maturity upon the occurrence of certain circumstances. Upon conversion, holders of the Notes will receive cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election.
Concurrently with the issuance of the Notes, we entered into separate note hedge and warrant transactions. These separate transactions were completed to reduce the potential economic dilution from the conversion of the Notes.
Our Notes have a fixed annual interest rates at 0.75%, 1.50%, andrate of 0.25%, and therefore we do not have economic interest rate exposure on ourthe 2022 Notes. However, the valuesvalue of the 2022 Notes areis exposed to interest rate risk. Generally, the fair market value of our fixed interest ratethe 2022 Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair valuesvalue of the 2022 Notes areis affected by our stock price. The carrying valuesvalue of our 2018 Notes, 2020 Notes, andthe 2022 Notes were $337 million, $219 million, and $918 million, respectively,was $1.1 billion as of October 31, 2017. These represent2020. The carrying value represents the liability component of the principal balance of ourthe 2022 Notes as of October 31, 2017.2020. The total estimated fair valuesvalue of the 2018 Notes, 2020 Notes, and 2022 Notes atwas $1.7 billion as of October 31, 2017 were $475 million, $367 million, and $1.2 billion, respectively.2020. The estimated fair values werevalue was determined based on the quoted bid pricesprice of the 2022 Notes in an over-the-counter market as of the last trading day of tradingthe current fiscal quarter, which was $150.67.
In April 2020, we entered into a credit agreement pursuant to which the lenders would extend to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million, and an unsecured revolving credit facility in an aggregate principal amount of $750 million. The Term Loan and Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin that ranges from 0.000% to 0.625%, or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin that ranges from 1.000% to 1.625%. The base rate is defined as the greatest of (i) Bank of America’s prime rate, (ii) the federal funds rate plus 0.50% or (iii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market for the three months ended ata period of one month (but not less than zero) plus 1.00%. Actual margins under either election will be based on our consolidated leverage ratio.
As of October 31, 2017,2020, the Term Loan had a carrying value of $739 million, and there were no outstanding borrowings under the Revolving Credit Facility. The interest rate on the Term Loan was 1.38% as of October 31, 2020.
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Because the interest rates applicable to borrowings under the Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which were $135.78, $146.97, and $101.40, respectively. affect our cost of borrowing. A hypothetical immediate increase of 100 basis points in interest rates would not have had a significant impact on our results of operations.
For further information, see Note 10, Debt, of the notesNotes to condensed consolidated financial statements.Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officerofficers and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("the (“Exchange Act"Act”), as of the end of the period covered by this report.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officerofficers and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officerofficers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our principal executive officerofficers and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officerofficers and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.reporting, despite the fact that the majority of our employees are continuing to work remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to understand the potential impact on their design and operating effectiveness.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, weWe are or may beregularly involved in various legal proceedings arising from the normal course of business including matters related to alleged infringement of third-party patentswith claims, suits, regulatory and government investigations, and other proceedings involving competition, intellectual property, rights,data security and privacy, tax and related compliance, labor and employment, commercial employmentdisputes, and other claims. We are not presently a party to any litigation the outcome of which we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. Defending suchmatters. Such claims, suits, regulatory and government investigations, and other proceedings is costly and can impose a significant burden on management and employees, we may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The resolution of legal matters could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, payor could result in monetary damages, fines, civil or enter into short-criminal penalties, reputational harm, or long-term royaltyother adverse consequences.
These claims, suits, regulatory and government investigations, and other proceedings may include speculative, substantial, or licensing agreements, or could otherwiseindeterminate monetary amounts. We record a liability when we believe that it is probable that a liability has been incurred and the amount can be materialreasonably estimated. Significant judgment is required to determine both the likelihood of there being a liability and the estimated amount of a liability related to such matters. With respect to our financial conditionoutstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible liability will not, either individually or in aggregate, have a material adverse effect on our business, operating results, cash flows, or both, or adversely affect our operating results.financial condition. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.

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ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in Part I, Item 1 of this report,Quarterly Report on Form 10-Q, before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial condition, operating results, of operations, and prospects could be materially and adversely affected. The market price of our securities could decline due to the materialization of these or any other risks, and you could lose part or all of your investment.
Summary of Risk Factors Related
The below summary risks provide an overview of the material risks we are exposed to Our Businessin the normal course of our business activities. The below summary risks do not contain all of the information that may be important to you, and you should read the summary risks below together with the more detailed discussion of risks set forth following this section under the heading “Risk Factors,” as well as elsewhere in this Quarterly Report on Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below or discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may apply to our activities or operations as currently conducted, as we may conduct them in the future, or in the markets in which we currently operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including those associated with the following:
If•the ongoing COVID-19 pandemic, the resulting global economic volatility, and measures taken in response to the pandemic may materially and adversely affect our business, operating results, financial condition, and earnings guidance that we may issue from time to time;
•if our security measures are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities;
•if we fail to properly manage our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties, experience service outages or delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our reputation and operating results may be adversely affected;
•privacy concerns and domestic or foreign laws and regulations may reduce the effectiveness of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results;
•the markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected;
•our quarterly results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control, and such fluctuations and related impacts to any earnings guidance we may issue from time to time, or any modification or withdrawal thereof, may negatively impact the value of our securities;
•if we are not able to realize a return on our current development efforts or offer new features, enhancements, and modifications to our products and services, our business and operating results could be adversely affected; additionally, if we are not able to realize a return on the investments we have made toward entering new markets and new lines of business, including as a result of unfavorable laws, regulations, interpretive positions, or standards governing new and evolving technologies we incorporate into our products and services, our business and operating results could be adversely affected;
•if we are unable to establish or maintain our strategic relationships with third parties, or fail to successfully integrate our applications with a variety of third-party technologies, our ability to compete or grow our revenues may be impaired and our operating results may suffer;
•we have acquired, and may in the future acquire, other companies, employee teams, or technologies, which could divert our management's attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results;
•if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges;
•we may lose key employees or be unable to attract, train and retain highly-skilled employees, which may adversely affect our business and future growth prospects;
•if we cannot maintain our corporate culture, we may lose the innovation, teamwork, and passion that we believe contributes to our success, and our business may be harmed;
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•because we encounter long sales cycles when selling to large customers and we recognize subscription services revenue over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and it may be difficult to predict a negative impact on our operating and financial results; additionally, our ability to predict the rate of customer subscription renewals or adoptions is limited;
•our business could be adversely affected if our users are not satisfied with the deployment, training, and support services provided by us and our partners, and such dissatisfaction could damage our ability to expand the applications subscribed to by our current customers and negatively impact our ability to compete for new business;
•sales to customers outside the United States or with international operations expose us to risks inherent in global operations;
•we have a history of cumulative net losses and we may not be profitable on a GAAP basis for the foreseeable future;
•any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand; additionally, we may be sued by third parties for alleged infringement of their proprietary rights or in connection with our use of open source software;
•risks related to government contracts and related procurement regulations, including risks of fines and termination of such contracts by the government at any time, may adversely impact our business and operating results;
•the dual class structure of our common stock has the effect of concentrating voting control with our Chairman and co-CEO, and also with other executive officers, directors, and affiliates, which gives our Chairman and co-CEO and other members of management control over key decisions and limits or precludes the ability of non-affiliates to influence corporate matters;
•our substantial indebtedness may adversely affect our financial condition and operating results;
•the convertible note hedge and warrant transactions may affect the value of our Class A common stock;
•Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock; and
•the exclusive forum provision in our organizational documents may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
Risk Factors Related to Our Business
The extent to which the ongoing COVID-19 pandemic, the resulting global economic volatility, and measures taken in response to the pandemic will continue to impact our business, operating results, and financial condition will depend on future developments, which are highly uncertain and difficult to predict.
The COVID-19 pandemic has disrupted the flow of the economy and put unprecedented strains on governments, healthcare systems, educational institutions, businesses, and individuals around the world. The impact on the global population and the duration of the COVID-19 pandemic is difficult to assess or predict. It is even more difficult to predict the impact on the global economic markets, which will be highly dependent upon the actions of governments, businesses, and other enterprises in response to the pandemic as well as the effectiveness of those actions. As a result of the COVID-19 pandemic, the trading prices for our Class A common stock and the stock of other technology companies have been highly volatile, and such volatility may continue for the duration of and possibly beyond the COVID-19 pandemic. Any sustained adverse impacts from the continued spread of COVID-19 could materially and adversely affect our business, operating results, financial condition, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
In response to COVID-19, as many other companies have done, we have temporarily closed the majority of our global offices, required most of our employees to continue to work remotely, implemented travel restrictions, postponed or cancelled certain of our customer, industry, implementation partner, analyst, investor, and employee events, and converted other events to virtual-only experiences. These precautionary measures that have been adopted, particularly if the COVID-19 pandemic worsens or is prolonged, could have increasingly negative effects on our sales and marketing efforts, customer success efforts, and revenue growth rates or other financial metrics, or create operational or other challenges, any of which could adversely impact our business, operating results, and financial condition in any given period. We may also continue to experience impacts to productivity and other operational and business impacts if our employees, executives, or their family members experience health issues, or if there are continued delays in our hiring and onboarding of new employees. The COVID-19 pandemic could also impact our data center and computing infrastructure operations, including potential disruptions to, among other things, the supply chain required to maintain these systems, construction projects designed to expand our data center capacity, and primary vendors who provide critical products and services.
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Our future revenues rely on new customer acquisition, and we have experienced and may continue to experience an increase in delayed purchasing decisions from prospective customers and a reduction in customer demand, particularly in the industries most impacted by the COVID-19 pandemic, such as travel and hospitality and healthcare. We also may continue to experience a reduction in renewal rates, particularly within our subset of small and medium-sized planning customers, as well as reduced customer spend and delayed payments that could materially impact our business, operating results, and financial condition in future periods. In addition, some of our competitors may offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers. While our subscription services revenue is relatively predictable in the near term as a result of our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our operating results and overall financial performance until future periods.
It is not possible for us to estimate the duration or magnitude of the adverse results of the COVID-19 pandemic and its effects on our business, operating results, or financial condition at this time, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. To the extent the COVID-19 pandemic adversely affects our business, operating results, and financial condition, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
If our security measures are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
Our applications involve the storage and transmission of our customers’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, customers, and suppliers, as well as their financefinancial, accounting, and payroll data.data and other sensitive business and personal information. As a result, unauthorized access, acquisition, use, or usedestruction of this data, or unavailability of data, could resultexpose us to regulatory actions, litigation, investigations, remediation obligations, damage to our reputation and brand, supplemental disclosure obligations, loss of customer, consumer, and partner confidence in the loss orsecurity of our applications, destruction of information, litigation, indemnity obligations, impairment to our business, and resulting fees, costs, expenses, loss of revenues, and other potential liabilities. We devote significant financial and personnel resources to implement and maintain security measures. While we have security measures in place that are designed to protect against these risks, preserve the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches, if theseour security measures aremay be compromised as a result of third-party action, including intentional misconduct, including by computer hackers, employeeemployees, contractors, or vendors, as well as software bugs, human error, malfeasancetechnical malfunctions, or otherwise,other malfeasance.
Cybersecurity threats and someone obtains unauthorized access to or use of our customers’ data, our reputation could be damaged, our business may suffer and we could incur significant liabilities. Cyber security challenges, including threats to our own IT infrastructure or those of our customers or third-party providers,attacks are often targeted at companies such as ours and may take a variety of forms ranging from individual andindividuals or groups of hackers, including those who appear to offer a solution to a vulnerability, to sophisticated organizations.organizations, including state-sponsored actors. Key cyber securitycybersecurity risks range from viruses, worms, and other malicious software programs, including phishing attacks or ransomware, to "mega breaches"exploitation of software bugs or other defects, to “mega breaches” targeted against cloud services and other hosted software, any of which can result in disclosure of confidential information and intellectual property, defective products, production downtimes, supply shortagesreputational harm, compromised data, and compromised data. Becausean increase in costs to the business. As the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniquesattacks or to implement adequate preventative measures. Although we have developed systems and processes that are designed to protect our systems, software and data, as well as customer data and other user data and to prevent data loss and detect security breaches, there can be no assurance that such measures will be effective against all cybersecurity threats or perceived threats.
Additionally, during the ongoing COVID-19 pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks.
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Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, as well as incorporated third-party products, services and technologies into our products and services. Although we devote significant resources to address any known security issues with respect to such acquisitions, partnerships, and incorporated technologies, we may still inherit additional risks when they are integrated within Workday. In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of financial management, human resources, planning, spend management, or analytics applications, or in cloud applications for enterprises in general. Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, require us to compensate our customers or other users for certain losses, or result in lawsuits, regulatory fines, or other action or liabilities, which could adversely affect our operating results.
We depend on data centers and computing infrastructure operated by third parties and any disruption in these operations could adversely affect our business.
We host our applications and serve our customers from data centers located in Ashburn, Virginia; Atlanta, Georgia; Portland, Oregon; Dublin, Ireland; Amsterdam, the Netherlands; and Toronto, Canada. While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired or ceases business we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.
In addition, we rely upon third parties, which we refer to as our hosted infrastructure partners, to operate certain aspects of our services, such as environments for development testing, training and sales demonstrations, as well as others. For example, Amazon Web Services ("AWS") provides a distributed computing infrastructure platform for business operations and we have announced our intention to make certain of our service offerings available through AWS. Given this, any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.

Problems faced by our third-party data center operations or hosted infrastructure partners, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our third-party data center operators or hosted infrastructure partners could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by our third-party data center operators, our hosted infrastructure partners or any of the other service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at our data centers or at our hosted infrastructure partners or any errors, defects, disruptions, or other performance problems with our applications or the hosted infrastructure on which they run could adversely affect our reputation and may damage our customers’ stored files or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers for prepaid and unused subscription services, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
Furthermore, our financial management application is essential to Workday's and our customers’ financial projections, reporting and compliance programs, particularly customers who are public reporting companies. Any interruption in our service may affect the availability, accuracy or timeliness of such projections, reporting and compliance programs and as a result could damage our reputation, cause our customers to terminate their use of our applications, require us to issue refunds for prepaid and unused subscription services, require us to indemnify our customers against certain losses and prevent us from gaining additional business from current or future customers, as well as impact our ability to accurately and timely meet our reporting and other compliance obligations.results.
If we fail to properly manage our technical operations infrastructure, or experience service outages, or delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our reputation and operating results may be adversely affected.
We have experienced significant growth in the number of users, transactions, and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and users, as well as our own needs, and to ensure that our services and solutions are accessible within an acceptable load time. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters, updates, the evolution of our applications, and to reduce infrastructure latency associated with dispersed geographic locations. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure requirements, our existing customerswe may experience service outages. IfIn addition, the COVID-19 pandemic could also impact our data center and computing infrastructure operations, including potential disruptions to, among other things, the supply chain required to maintain these systems, construction projects designed to expand our data center capacity, and primary vendors who provide critical products and services. Furthermore, if our operations infrastructure fails to scale, customerswe may experience delays in providing service as we seek to obtain additional capacity.capacity, and no assurance can be made that we will be able to secure such additional capacity on the same or similar terms as we currently have, which could result in a significant increase in our operating costs. Moreover, any failure to scale and secure additional capacity could result in delays in new feature rollouts, reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business and operating results.
We have experienced, and may in the future experience, system disruptions, outages, and other performance problems.problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure changes, vendor issues, software and system defects, human or software errors,error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Because of the large amount of data that we collect and process in our systems, it is possible that these issues could result in data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant. Furthermore, the availability or performance of our applications could also be adversely affected by our customers’ and other users’ inability to access the internet. For example, our customers and other users access our applications through their internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ and other users’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues.
Our customer agreements typically provide for monthly service level commitments on a monthly basis.commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our applications as a result of the foregoing or otherwise, we may be contractually obligated to issue service credits or refunds to customers for prepaid and unused subscription services, our customers may make warranty or other claims against us, or we could face contract terminations.terminations, which would adversely affect our attrition rates. Any extended service outages could result in customer losses and adversely affect our reputation, revenuesbusiness, and operating results.
Furthermore, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
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We depend on data centers and computing infrastructure operated by third parties, and any disruption in these operations could adversely affect our business and operating results.
We host our applications and serve our customers from data centers located in the United States, Canada, Europe, and Asia. While we control and have access to our servers and all of the components of our network that are located in these data centers, we do not control certain aspects of these facilities, including their operation and security. The owners of these data center facilities have limited or no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if any of these data center operators are acquired or cease to do business, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and experience possible service interruptions in connection with doing so.
In addition, we also rely upon third-party hosted infrastructure partners globally, including Amazon Web Services (“AWS”), Dimension Data, Microsoft Azure, and Google Public Cloud to serve customers and operate certain aspects of our services, such as environments for development testing, training, sales demonstrations, and production usage. Any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.
Problems faced by these data center operators or hosted infrastructure partners, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers or other users. In addition, the ongoing COVID-19 pandemic could have a significant adverse operational impact on these data center operators and hosted infrastructure partners on which we rely, as they continue to navigate their own challenges resulting from their employee base continuing to work remotely and other impacts from the pandemic. Furthermore, these data center operators or hosted infrastructure partners could decide to close their facilities or cease operations without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by these data center operators, our hosted infrastructure partners, or any of the other service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict.
Additionally, if these data center operators or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at these data centers or at our hosted infrastructure partners or any errors, defects, disruptions, or other performance problems with our applications or the infrastructure on which they run could adversely affect our reputation and may damage our customers’ or other users’ stored files or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers for prepaid and unused subscription services, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
Furthermore, our financial management application is essential to Workday’s and our customers’ financial projections, reporting, and compliance programs, particularly customers who are public reporting companies. Any interruption in our service may affect the availability, accuracy, or timeliness of such projections, reporting and compliance programs and as a result could damage our reputation, cause our customers to terminate their use of our applications, require us to issue refunds for prepaid and unused subscription services, require us to compensate our customers for certain losses, and prevent us from gaining additional business from current or future customers as well as impact our ability to accurately and timely meet our reporting and other compliance obligations. In addition, because we use Workday's financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
Privacy concerns and laws or other domestic or foreign laws and regulations may reduce the effectiveness of our applications, result in significant costs and compliance challenges, and adversely affect our business.business and operating results.
Our customers can use our applications to collect, use, and store personal or identifying information regarding a variety of individuals in connection with their operations, including but not limited to their employees, contractors, students, job applicants, customers, and suppliers. Additionally, individuals using our WayToTM by Workday application may store, manage, and share with certain organizations credentials such as employment history, education, skills, and compensation information. National, state and local governments and agencies in the countries in which our customers operate have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, transfer, processing, protection, and disclosure of personal information obtained from consumers and individuals, which could impact our ability to offer our services in certain jurisdictions or our customers'customers’ ability to deploy our solutions globally. Privacy-relatedWe may also be required to develop features, enhancements, or modifications to our products to support our customers’ evolving compliance obligations. This may require us to divert development and other resources from other areas, incur significant expenditures, or, if we are unsuccessful in delivering these features, enhancements, or modifications, result in monetary damages, loss of revenue or customers, reputational harm, or other adverse impacts to our business.
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Privacy and data protection laws are particularly stringent, in Europe. Theand the costs of compliance with and other burdens imposed by privacy-relatedsuch laws, regulations, and standards may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties, or liabilities for noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. Even the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness, or use of our applications. Moreover, if Workday employeeswe or our subprocessors fail to adhere to adequate data protection practices around the usage of and access to our customers'customers’ and other users’ personal data or fail to report a data breach or other loss of data within timeframes mandated by law or our customer contracts, we may be liable for certain losses, and it may damage our reputation and brand.

Additionally, we expect that existing laws, regulations, and standards may be interpreted in new and differing manners in the future and may be inconsistent among jurisdictions. Future laws, regulations, standards, and other obligations, and changes in the interpretation of existing laws, regulations, standards, and other obligations could result in increased regulation, increased costs of compliance and penalties for non-compliance, and limitations on data collection, use, disclosure, and transfer for Workday and our customers. TheIn 2016, the European Union ("EU"(“EU”) and United States recently agreed to a framework for data transferred from the EU to the United States, called the Privacy Shield, but this new framework has been challenged by private parties and may face additional challenges by national regulators or additional private parties. Additionally, in 2016 the EU adopted a new regulation governing data privacy called the General Data Protection Regulation ("GDPR"(“GDPR”), which becomesbecame effective in May 2018. The GDPR establishesestablished new requirements applicable to the handling of personal data and imposes penalties for non-compliance of up tothe greater of €20 million or 4% of worldwide revenue.
The costs Customers, particularly in the EU, are seeking assurances from their suppliers, including us, that their processing of compliancepersonal data of EU nationals is in accordance with and other burdens imposed by, privacy laws and regulations that are applicable to the businesses of our customers may adversely affect our customers’ ability and willingness to process, handle, store, use and transmit demographic and personal information of their employees, customers and suppliers, which could limit the use, effectiveness and adoption of our applications and reduce overall demand. In addition, the other bases on which we and our customers rely for the transfer of data, such as model contracts, continue to be subjected to regulatory and judicial scrutiny.GDPR. If we or our customers are unable to transfer data between and among countries and regions in which we operate, it could decreaseprovide adequate assurances to such customers, demand for our applications require uscould be adversely affected. In addition, we must continue to restrictseek assurances from our business operations,subprocessors that they are handling personal data in accordance with GDPR requirements in order to meet our own obligations under the GDPR. In addition, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020, and impairthe California Privacy Rights Act (“CPRA”), which expands upon the CCPA, was passed in the recent California election in November 2020. The CCPA and CPRA give California consumers certain rights similar to those provided by the GDPR, and customers and other users may seek similar assurances from suppliers regarding compliance. Moreover, there are a number of other legislative proposals worldwide, including in the United States at both the federal and state level, that could impose additional and potentially conflicting obligations in areas affecting our ability to maintain and grow our customer base and increase our revenue. Even the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness or use of our applications.business.
In addition to government activity, privacy advocacy and other industry groups have established or may establish various new, additional, or different self-regulatory standards that may place additional burdens on us. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties. If we are unable to maintain these certifications or meet these standards, it could reduce demand for our applications and adversely affect our business and operating results.
The costs of compliance with, and other burdens imposed by, privacy laws and regulations that are applicable to the businesses of our customers may adversely affect our customers’ ability and willingness to process, handle, store, use, and transmit demographic and personal data, which in turn could limit the use, effectiveness, and adoption of our applications and reduce overall demand. In addition, the other bases on which we and our customers rely for the transfer of data, such as model contracts, continue to be subjected to regulatory and judicial scrutiny. In July 2020, the Court of Justice of the European Union invalidated the Privacy Shield framework for data transferred from the European Economic Area to the United States. While the same court upheld the use of Standard Contractual Clauses (“SCCs”), which we offer to our customers to enable data transfers, the decision has led to some uncertainty regarding the use of SCCs as the mechanism for data transfers to the United States and the court made clear that reliance on SCCs alone may not necessarily be sufficient in all circumstances. Use of SCCs must now be assessed on a case-by-case basis, taking into account the legal regime applicable in the destination country. In November 2020, the European Data Protection Board issued recommendations, which may impose higher burdens on the use of SCCs for cross-border data transfers, including transfers to cloud service providers, and create challenging technical issues. To comply with these recommendations, we may need to implement additional contractual and technical safeguards for any personal data transferred out of the European Economic Area, which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business. At the same time in November 2020, the European Commission released a draft of revised standard contractual clauses. If adopted, these could make aspects of contracting around cross-border transfers easier, particularly in relation to use of subprocessors. Ultimately, if we or our customers are unable to transfer data between and among countries and regions in which we operate, it could decrease demand for our applications, require us to restrict our business operations, and impair our ability to maintain and grow our customer base and increase our revenue.
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The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
The markets for financial management and HCM applications are highly competitive, with relatively low barriers to entry for some applications or services. Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with many customers. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors. Oracle and SAP are larger and have greater name recognition, significantly longer operating histories, larger marketing budgets, and significantly greater resources than we do. These vendors, as well as other competitors, could offer financial management and HCM applications on a standalone basis at a low price or bundled as part of a larger sale. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances, and organic development. We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions. These vendors include, without limitation: UKG Inc. (formerly The Ultimate Software Group, Inc.), Automatic Data Processing, Inc., Infor, Inc., Ceridian HCM Holding Inc., Microsoft Corporation, Anaplan, Inc., and Coupa Software Inc. In addition, other cloud companies that provide services in different target markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications. As the market matures and as existing and new market participants introduce new types of technologies and different approaches that enable organizations to address their human capital management and financial needs, we expect this competition to intensify in the future.
Many of our competitors are able to devote greater resources to the development, promotion, and sale of their products and services. This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions. Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition, such as the merger between Kronos Incorporated and The Ultimate Software Group, Inc.. In addition, many of our competitors have established marketing relationships, access to larger customer bases, and major distribution agreements with consultants, system integrators, and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. If our competitors’ products, services, or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected. In addition, our competitors may offer their products and services at a lower price, or, particularly during the ongoing COVID-19 pandemic, may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly operating results, including the levels of our revenues, operating margin, profitability, cash flow, unearned revenue, and remaining subscription services revenue performance obligations, which we also refer to as backlog, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. As discussed above, the extent to which the ongoing COVID-19 pandemic, the resulting global economic uncertainty, and measures taken in response to the pandemic could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict. Fluctuations in our quarterly results and related impacts to any earnings guidance we may issue from time to time, including any modification or withdrawal thereof, may negatively impact the value of our securities. For example, beginning in March 2020, we began experiencing and continue to experience unfavorable impacts to our new subscription bookings, causing us to reduce our fiscal 2021 subscription revenue outlook. Additionally, as we typically sign a significantly higher percentage of agreements with new customers as well as renewal agreements with existing customers in the fourth quarter of each year, we may experience a greater impact on our business and quarterly results due to the prolonged uncertainty.
Additional factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
•our ability to attract new customers;
•the timing and rate at which we sign agreements with customers;
•the financial condition and creditworthiness of our customers;
•the addition or loss of large customers, including through acquisitions or consolidations;
•customer renewal rates;
•the timing of operating expenses and recognition of revenues;
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•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure;
•network outages or security breaches;
•general economic and market conditions, including the impact of the ongoing COVID-19 pandemic;
•increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;
•changes in our pricing policies or those of our competitors;
•the mix of applications sold during a period;
•seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter;
•the timing and success of new application and service introductions by us or our competitors;
•changes in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners;
•changes in laws and regulations that impact our business or reported financial results, including changes in accounting principles generally accepted in the United States; and
•the timing of expenses related to acquisitions and potential future charges for impairment of goodwill.
If we are not able to realize a return on our current development efforts or offer new features, enhancements, and modifications to our services, our business and operating results could be adversely affected.
Developing software applications and related enhancements, features, and modifications is expensive, and the investment in product development often involves a long return on investment cycle. Accelerated application introductions and short application life cycles require high levels of expenditures that could adversely affect our operating results if not offset by revenue increases, and we believe that we must continue to dedicate a significant amount of resources to our development efforts to maintain our competitive position. However, we may not receive significant revenues from these investments for several years, if at all. Furthermore, the COVID-19 pandemic could have an impact on our plans to offer certain new features, enhancements, and modifications of our applications in a timely manner, particularly if we experience impacts to productivity due to our employees or their family members experiencing health issues, if our employees continue to work remotely for extended periods, or if there are continuing delays in our hiring and onboarding of new employees. If we are unable to provide new features, enhancements, and modifications in a timely and cost-effective manner that achieve market acceptance or that keep pace with rapid technological developments and changing regulatory landscapes, our business and operating results could be adversely affected. For example, we are focused on enhancing the features and functionality of our applications to improve their utility to larger customers with complex, dynamic, and global operations, or we may be required to develop new features, enhancements, or modifications to our products to support our customers’ evolving compliance obligations. The success of enhancements, new features, and applications depends on several factors, including their timely completion, introduction, and market acceptance as well as access to development resources and the technologies required to build and improve our applications, such as the datasets required to train our machine learning models. As a result, we may not be successful in developing these new features, enhancements, modifications, and applications, and bringing them to market timely, if at all. Failure in this regard may significantly impair our revenue growth by negatively impacting our customer renewal rates or our ability to attract new customers.
Our growth depends on the success of our strategic relationships with third parties as well as our ability to successfully integrate our applications with a variety of third-party technologies.
We depend on relationships with third parties such as deployment partners, technology and content providers, and other key suppliers, and are also dependent on third parties for the license of certain software and development tools that are incorporated into or used with our applications. If the operations of these third parties are disrupted as a direct or indirect result of the ongoing COVID-19 pandemic, our own operations may suffer, which could adversely impact our operating results. In addition, we rely upon licensed third-party software to help improve our internal systems, processes, and controls. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. We may be at a disadvantage if our competitors are effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with such third parties. In addition, acquisitions of our partners by our competitors could end our strategic relationship with the acquired partner and result in a decrease in the number of our current and potential customers, or the support services available for third-party technology may be negatively affected by mergers and consolidation in the software industry. If we are unsuccessful in establishing or maintaining our relationships with these third parties, or in monitoring the quality of their products or performance, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer.
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To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software, could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, and injure our reputation. Furthermore, software may not continue to be available to us on commercially reasonable terms. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. Integration of new software into our applications may require significant work and require substantial investment of our time and resources.
We also need to continuously modify and enhance our applications to keep pace with changes in third-party internet-related hardware, iOS, Android, other mobile-related technologies, and other third-party software, communication, browser, and database technologies. We must also appropriately balance the application capability demands of our current customers with the capabilities required to address the broader market. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our product development expenses. Any failure of our applications to operate effectively with future network platforms and other third-party technologies could reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business and operating results. We may experience difficulties in managing improvements to our systems, processes, and controls or in connection with third-party software, which could materially impair our ability to provide solutions or professional services to our customers in a timely manner, cause us to lose customers, limit us to smaller deployments of our solutions, or increase our technical support costs.
Our historic revenue growth rates should not be viewed as indicative of our future performance.
Our revenue growth rates have declined and may decline again in the future as the size of our customer base and market penetration increases. In addition, our future rate of growth is subject to a number of uncertainties, including general economic and market conditions, including those caused by the ongoing COVID-19 pandemic, as well as risks associated with growing companies in rapidly changing industries. Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, some of which may be magnified by the COVID-19 pandemic. As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected.
Additionally, our ability to accurately forecast our future rate of growth is limited. It is difficult to predict customer and other user adoption rates and demand for our applications, the future growth rate and size of the cloud computing market for financial management and HCM services, or the entry of competitive applications. Moreover, it has been and, until the effects of the COVID-19 pandemic are contained, will continue to be, even more difficult for us to forecast our operating results. We plan our expense levels and investments on estimates of future revenue and anticipated rates of growth. If our growth does not meet estimates, we may not be able to adjust our spending quickly enough to avoid an adverse impact on our financial results as a consequence of spending that is not aligned with our actual performance.
Moreover, we have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, including the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We have experienced rapid growth. Ifgrowth, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges.
We have experienced and are continuing to experience, a period of rapid growth in our customers, headcount, and operations. In particular, we grew from approximately 1,550 employees at the time of our initial public offering ("IPO") in October 2012 to approximately 7,900 employees as of October 31, 2017,operations and have also significantly increased the size of our customer base. We anticipate that we will continue to expand our operationscustomer base, headcount, and headcount in the near term, and to expand our customer base.operations. This growth has placed, and future growth will place, a significant strain on our management, generaladministrative, operational, and administrative resources and operationalfinancial infrastructure. Our success will depend in part on our ability to manage this growth effectively and to scale our operations. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls andas well as our reporting systems and procedures. As we continue to grow, we also need to ensure that our policies and procedures evolve to reflect our current operations and are appropriately communicated to and observed by employees, and that we appropriately manage our corporate information assets, including confidential and proprietary information. Failure to effectively manage growth could result in difficulty or delays in deploying customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties, and any of these difficulties could adversely impact our business performance and resultsoperating results.

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We depend on our senior management team and the loss of one or moremay lose key employees could adversely affect our business.or be unable to attract, train, and retain highly skilled employees.
Our success dependsand future growth depend largely upon the continued services of our executive officers. We also rely on our leadership team in the areasofficers, other members of product development, marketing, sales, services,senior management, and general and administrative functions and on mission-critical individual contributors in product development. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.other key employees. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period, and they could terminate their employment with us at any time. The loss of one or more ofFrom time to time, there may be changes in our executive officersmanagement team and to other key employee roles resulting from organizational changes or keythe hiring or departure of executives or other employees, and any failure to develop an appropriate succession plan for these personswhich could have a serious adverse effect on our business.
An inabilitybusiness and operating results. Moreover, if key personnel become ill due to attractthe ongoing COVID-19 pandemic, we may not be able to manage our business effectively and, retain highly skilled employees could adversely affectas a result, our business and our future growth prospects.operating results could be harmed.
To execute our growth plan, we must attract, train, and retain highly qualified personnel,personnel. In the technology industry, and our managers must be successfulparticularly in hiring employees who are a good cultural fit and have the competencies to succeed at Workday. Competition for these personnelSan Francisco Bay Area, the competition is intense for highly skilled employees, especially for engineers with high levels ofsignificant experience in designing and developing software and Internet-relatedinternet-related services, including in the areas of machine learning and artificial intelligence, for cybersecurity professionals, and for senior sales executives. In addition, the expansion of our sales infrastructure, both domestically and internationally, is necessary to grow our customer base and business. Identifying and recruiting qualified personnel and training them in our sales methodology, our sales systems, and the use of our software requires significant time, expense, and attention. Our business may be adversely affected if our efforts to attract and train new members of our direct sales force do not generate a corresponding increase in revenues. From time to time, we have experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, and we may not be able to fill positions in desired geographic areas or at all.

Many of the companies with which we compete for experienced personnel have greater resources than we have and some of these companies may offer greatermore lucrative compensation packages. Particularly in the San Francisco Bay Area, jobpackages than we offer. Our business may be adversely affected if we are unable to retain our highly skilled employees, especially our senior sales executives. Job candidates and existing employees carefully consider the value of the equity awards they receive in connection with their employment. If the perceived or actual value of our equity awards declines, or if the mix of equity and cash compensation that we offer is unattractive, it may adversely affect our ability to recruit and retain highly skilled employees. JobOur recruiting efforts may also be limited by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas (including during the ongoing COVID-19 pandemic). Additionally, job candidates may also be threatened with legal action under agreements with their existing employers if we attempt to hire them, which could have a chilling effect on hiring and result in a diversion of our time and resources. Additionally, laws and regulations, such as restrictive immigration laws, may limit our ability to recruit internationally. We must also continue to retain and motivate existing employees through our compensation practices, company culture, and career development opportunities. If we fail to attract new personnel or to retain our current personnel, our business and future growth prospects could be adversely affected.
If we cannot maintain our corporate culture, we could lose the innovation, teamwork, and passion that we believe contribute to our success, and our business may be harmed.
We believe that a critical component of our success has been our corporate culture, as reflected in our core values: employees, customer service, innovation, integrity, fun, and profitability. We have invested substantial timealso believe that our commitment to our corporate culture, as well as our commitment to building products and resources in buildingservices that help provide our team.customers with information regarding their own workforce and corporate culture, is part of the reason why our customers choose us. As we continue to grow, both organically and through acquisitions of employee teams, and develop the infrastructure associated with being a more mature public company, we will need to maintain our corporate culture among a larger number of employees who are dispersed inthroughout various geographic regions. The COVID-19 pandemic requires significant action to preserve culture with an employee base temporarily working remotely and facing unique personal and professional challenges. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursueachieve our corporate objectives.
The markets in which we participate are intensely competitive, and if we do not compete effectively,objectives, including our operating results could be adversely affected.
The markets for financial management and HCM applications are highly competitive, with relatively low barriers to entry for some applications or services. Our primary competitors are SAP SE ("SAP") and Oracle Corporation ("Oracle"), well-established providers of financial management and HCM applications, which have long-standing relationships with many customers. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours, and prefer to maintain their existing relationships with competitors. SAP and Oracle are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do. These vendors, as well as other competitors, could offer financial management and HCM applications on a standalone basis at a low price or bundled as part of a larger sale. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances and organic development. Legacy vendors may also seek to partner with other leading cloud providers, such as the alliance between Oracle and Salesforce.com. We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions. These vendors include, without limitation: The Ultimate Software Group, Inc., Automatic Data Processing and Infor Global Solutions. We also face competition from cloud-based vendors including providers of applications for HCM and payroll services such as Ceridian, Inc. and providers of financial management applications such as NetSuite, Inc., which was recently acquired by Oracle. We may also face competition from a variety of vendors of cloud-based and on-premise software applications that address only one or a portion of our applications. In addition, other companies that provide cloud applications in different target markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications. With the introduction of new technologies and market entrants, we expect this competition to intensify in the future.
Many of our competitors are able to devote greater resources to the development, promotion and sale of their products and services. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. In addition, manyquickly develop and deliver new and innovative products.
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Table of our competitors have established marketing relationships, access to larger customer bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. If our competitors’ products, services or technologies become more accepted than our applications, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected. In addition, some of our competitors may offer their products and services at a lower price. If we are unable to achieve our target pricing levels, our operating results would be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.Contents

If the market for enterprise cloud computing grows more slowly than in recent years, our business could be adversely affected.
Our success will depend to a substantial extent on the continued growth of cloud computing in general, and of financial management and HCM services in particular. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to cloud computing. It is difficult to predict customer adoption rates and demand for our applications, the future growth rate and size of the cloud computing market or the entry of competitive applications. The continued expansion of the cloud computing market depends on a number of factors, including the cost, performance, and perceived value associated with cloud computing, as well as the ability of cloud computing companies to address security and privacy concerns. Further, the cloud computing market is less developed in many jurisdictions outside of the United States. If we or other cloud computing providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud computing applications as a whole, including our applications, may be negatively affected. If there is a reduction in demand for cloud computing caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and applications, decreases in corporate spending or otherwise, it could result in decreased revenues or growth rates and our business could be adversely affected.
If we are not able to provide successful enhancements, new features and modifications, our business could be adversely affected.
If we are unable to provide enhancements and new features for our existing applications or new applications that achieve market acceptance or that keep pace with rapid technological developments, our business could be adversely affected. For example, we are focused on enhancing the features and functionality of our applications to enhance their utility to larger customers with complex, dynamic and global operations. The success of enhancements, new features and applications depends on several factors, including the timely completion, introduction and market acceptance of the enhancements or new features or applications. Failure in this regard may significantly impair our revenue growth. In addition, because our applications are designed to operate on a variety of systems, we will need to continuously modify and enhance our applications to keep pace with changes in Internet-related hardware, iOS, Android and other mobile-related technologies and other software, communication, browser and database technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion. We must also appropriately balance the application capability demands of our current customers with the capabilities required to address the broader market. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our product development expenses. Any failure of our applications to operate effectively with future network platforms and technologies could reduce the demand for our applications, result in customer dissatisfaction and adversely affect our business.
Our applications must integrate with a variety of third-party technologies, and if we are unable to ensure that our solutions interoperate with such technologies, demand for our applications and our operating results could be adversely affected.
Our applications must integrate with a variety of technologies and we must continuously modify and enhance our applications to adapt to changes in operating systems, hardware, software, communication, browser and database technologies. Any failure of our solutions to operate effectively with future technologies or our failure to respond to changes in a timely and effective manner could reduce the demand for our applications, result in customer dissatisfaction and harm our operating results and business.
If our applications fail to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.
Our applications are inherently complex and may contain material defects or errors. Any defects in functionality or that cause interruptions in the availability of our applications could result in:
loss or delayed market acceptance and sales;
breach of warranty claims;
issuance of refunds or service credits to customers for prepaid and unused subscription services;
loss of customers;
diversion of development and customer service resources; and
injury to our reputation.
The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results.

Because of the large amount of data that we collect and process, it is possible that hardware failures or errors in our systems could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, the availability or performance of our applications could be adversely affected by a number of factors, including customers’ inability to access the Internet, the failure of our network or software systems, security breaches or variability in user traffic for our services. For example, our customers access our applications through their Internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our customers for damages they may incur resulting from certain of these events. In addition to potential liability, if we experience interruptions in the availability of our applications, our reputation could be adversely affected and we could lose customers.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
Catastrophic events may disrupt our business.
Our corporate headquarters are located in Pleasanton, California and we have data centers located in Ashburn, Virginia; Atlanta, Georgia; Portland, Oregon; Dublin, Ireland; Amsterdam, the Netherlands; and Toronto, Canada. We also rely on AWS’s distributed computing infrastructure platform. The west coast of the United States contains active earthquake zones and the southeast is subject to seasonal hurricanes. Additionally, we rely on our network and third-party infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational support, hosted services and sales activities. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our operating results.
Because we sell applications to manage complex operating environments of large customers, we encounter long sales cycles which could adversely affectwhen selling to large customers and we recognize subscription services revenue over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription services revenue over time as services are delivered to the customer, which typically occurs over a period of three years or longer. As a result, most of the subscription services revenue we report in each quarter is derived from the recognition of unearned revenue relating to subscriptions entered into during previous quarters. Consequently, a given period.
Our ability to increase revenues and achieve and maintain profitability depends,decline in large part,new or renewed subscription contracts in any single quarter will likely have a minor impact on widespread acceptanceour revenue results for that quarter. However, such a decline will negatively affect our revenue in future quarters. Additionally, because much of our applications by large businesses and other organizations. Salessales efforts are targeted at these large enterprise customers, our sales cycles involve greater costs, longer sales cycles, the provision of greater levels of education regarding the use and benefits of our applications, less predictability in completing some of our sales. Our customers’sales, and varying deployment timeframes vary based on many factors including the number, type, and typeconfiguration of applications being deployed, the complexity, scale, and scalegeographic dispersion of the customers’ businesses, the configuration requirements,business and operations, the number of integrations with other systems, and other factors, many of which are beyond our control. In
The ongoing COVID-19 pandemic and related precautionary measures we and other companies are taking are impacting our sales activity. For example, like many other companies, including our customers and prospects, our employees are continuing to work remotely, and we have limited all non-essential business travel. Restrictions on travel and in-person meetings have and could continue to interrupt our sales activity, and we cannot predict whether, for how long, or the large enterprise market,extent to which the customer’s decisionCOVID-19 pandemic may continue to usehave an impact. Our salesforce has historically met with our applications may be an enterprise-wide decisioncustomers and therefore, these types of sales require us to provide greater levels of education regardingpotential customers face-to-face when selling our solutions, and while the use and benefitsmajority of our applications. In addition,deployment activities are completed remotely, many of our target customers may prefer to purchase applications that are critical to their business from onehave certain deployment activities such as project kick-off and go-live activities completed on-site. Furthermore, because our future revenue growth relies, in large part, on new customer acquisition, any inability of our larger, more established competitors.salesforce to establish relationships with potential customers during the current environment, as well as prospects deferring buying decisions due to the economic uncertainty, is likely to have a negative impact on our future revenue growth and other financial measures. Our typical sales cycles are six to twelve months but can extend for eighteen months or more, including as a result of the ongoing COVID-19 pandemic, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt our applications beyond HCM. Longer sales cycles could cause our operating and financial results to suffer in a given period.
The loss Accordingly, the effect of one or moresignificant downturns in sales and market acceptance of our key customers,applications, including those caused by the ongoing COVID-19 pandemic, as well as potential changes in our pricing policies or rate of renewals, may not be fully reflected in our operating results until future periods. Additionally, we may be unable to adjust our cost structure to reflect any such changes in revenue. In addition, a failure to renew our subscription agreements with one or moremajority of our key customers, could negatively affect our ability to market our applications.
We rely on our reputation and recommendations from key customerscosts are expensed as incurred, while revenue is recognized over the life of the customer agreement. As a result, increased growth in order to promote subscriptions to our applications. The loss of, or failure to renew by, any of our key customers could have a significant impact on our revenues, reputation and our ability to obtain new customers. In addition, acquisitionsthe number of our customers could lead to cancellationresult in our recognition of more costs than revenue in the earlier periods of the terms of our contracts with thoseagreements. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as subscription services revenue from new customers or bygenerally is recognized over the acquiring companies, thereby reducingapplicable subscription term. Furthermore, our subscription-based model is largely based on the numbersize of our existingcustomers’ employee headcount. Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers during the COVID-19 pandemic, or customer insolvencies resulting from severe economic hardship during the COVID-19 pandemic, could have an impact on our subscription services revenue in any given period. Although we have downside protection in our customer agreements in the form of base minimums, should there be any prolonged decrease in our customers’ headcounts, we could experience reduced subscription services revenue upon renewal or potentially outside of the renewal period, which could materially impact our business and potential customers.

operating results in any given period.
Our business could be adversely affected if our customersusers are not satisfied with the deployment, training, and support services provided by us orand our partners.
Our business depends on our ability to satisfy our customers and end users, both with respect to our application offerings and the professional services that are performed to help our customersthem use features and functions that address their business needs. High customer satisfaction requires that our customers undergo a successful implementation and be properly trained on our applications to effectively implement and increase their level of adoption of such applications. Incorrect or improper implementation or use of our applications could result in customer and user dissatisfaction and harm our business and operating results.
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Professional services may be performed by our own staff, by a third party, or by a combination of the two. Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and third parties provide a majority of deployment services for our customers. The work performed by us or these third parties that we rely on, including any work related to the on-site components of deployment services.services requested by a customer, might be adversely impacted directly or indirectly by the ongoing COVID-19 pandemic, including as a result of restrictions in accessing customer sites. Additionally, if our customers’ personnel are unable to participate in deployment activities as a direct or indirect result of the ongoing COVID-19 pandemic, this could result in delays in customer go-live dates for our applications. If customers are not satisfied with the quality and timing of work performed by us or a third party or with the type of professional services or applications delivered, or if we or a third party have not fully delivered on certain commitments made to our customers, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction with our services could damage our ability to expand the applications subscribed to by our customers. We must also align our product development and professional services operations in order to ensure that customers’ evolving needs are met. Negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.customers both domestic and abroad.
Any failureAdditionally, in order to offer high-quality technical support services may adversely affectmaximize the value of our relationships withapplications, we must continue to educate and train our customers and end users to develop the skills necessary to harness the power of our financial results.
Our customersapplications. If we are not able to effectively educate and train our users, they may choose not to renew their subscriptions, market perceptions of our company and our applications may be impaired, and our reputation and brand may suffer. Customers and other users also depend on our support organization to provision the environments used by our customers and to resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our applications and business reputation and on positive recommendations from our existing customers. Any failureFailure to maintain high-quality technical support and training, or a market perception that we do not maintain high-quality support or training, could adversely affect our reputation, our ability to offer and sell our applications, to existing and prospective customers,our renewal rates, and our business operating results and financial position.
Sales to customers outside the United States or with international operations expose us to risks inherent in international sales and operations.
A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. Our international expansion efforts may not be successful in creating demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the international markets we enter. In addition, we will face risks in doing business internationally that could adversely affect our business, including:
the need to localize and adapt our applications for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions and associated expenses;
the need for a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;
stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor;
difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;
difficulties in leveraging executive presence and company culture globally;
different pricing environments, longer sales cycles and longer accounts receivable payment cycles, and collections issues;
new and different sources of competition;
potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
laws, customs and business practices favoring local competitors;
restrictive governmental actions focused on cross-border trade, such as duties, quotas and tariffs;
compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;
increased financial accounting and reporting burdens and complexities;
restrictions on the transfer of funds;
ensuring compliance with anti-corruption laws including the Foreign Corrupt Practices Act;
the effects of currency fluctuations on our revenues and customer demand for our services;
adverse tax consequences and tax rulings; and
unstable economic and political conditions.

Any of the above factors may negatively impact our ability to sell our applications and offer services internationally, reduce our competitive position in foreign markets, increase our costs of international operations and reduce demand for our applications and services from international customers. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time, an increasing portion of our international sales contracts may be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may impact our operating results when translated into U.S. dollars. We have a hedging program but we cannot ensure that this hedging program will be effective and we will continue to have risk of exchange rate fluctuations.
We have acquired, and may in the future acquire, other companies, employee teams or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.
We have acquired, and may in the future acquire, other companies, employee teams or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel or otherwise offer growth opportunities. The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
We have limited experience in acquisitions. We may not be able to integrate acquired personnel, operations and technologies successfully or effectively manage the combined operations following the acquisition. We also may not achieve the anticipated benefits from the acquisitions due to a number of factors, including:
inability to integrate or benefit from acquisitions in a profitable manner;
incurrence of acquisition-related costs or liabilities, some of which may be unanticipated;
difficulty integrating the intellectual property and operations of the acquired business;
difficulty integrating and retaining the personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
difficulty terminating or converting the customers of the acquired business onto our applications and contract terms;
adverse effects on our existing business relationships with business partners and customers as a result of the acquisition;
lack of experience in new markets, products or technologies;
diversion of management’s attention from other business concerns;
use of resources that are needed in other parts of our business; and
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer.
We have a history of cumulative losses and we do not expect to be profitable on a GAAP basis for the foreseeable future.
We have incurred significant losses in each period since our inception in 2005. These losses and our accumulated deficit reflect the substantial investments we made to acquire new customers and develop our applications. We expect our operating expenses to increase in the future due to anticipated increases in sales and marketing expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect our losses on a GAAP basis to continue for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses in the acquisition period because costs associated with acquiring customers are generally incurred up front, while subscription services revenues are generally recognized ratably over the terms of the agreements, which are typically three years or longer. You should not consider our recent growth in revenues as indicative of our future performance. We cannot assure you that we will achieve GAAP profitability in the future, nor that, if we do become profitable, we will sustain profitability.
We may not receive significant revenues from our current development efforts for several years, if at all.
Developing software applications is expensive and the investment in product development often involves a long return on investment cycle. We have made and expect to continue to make significant investments in development and related opportunities. Accelerated application introductions and short application life cycles require high levels of expenditures that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate a significant amount of resources to our development efforts to maintain our competitive position. However, we may not receive significant revenues from these investments for several years, if at all.

If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses with our revenue forecasts, our results could be harmed.
Our ability to forecast our future rate of growth is limited and subject to a number of uncertainties, including general economic and market conditions. We plan our expense levels and investment on estimates of future revenue and future anticipated rates of growth. We may not be able to adjust our spending quickly enough if our growth rates fall short of our expectations.
Moreover, we have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We may not be able to sustain our revenue growth rates in the future.
You should not consider our historical revenue growth rates as indicative of our future performance. Our revenue growth rates have declined, and may decline in future periods, as the size of our customer base increases and as we achieve higher market penetration rates. Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, among others. As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations, including the levels of our revenues, gross margin, operating margin, profitability, cash flow and unearned revenue, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our securities. Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
our ability to attract new customers;
the addition or loss of large customers, including through acquisitions or consolidations;
the timing of operating expenses and recognition of revenues;
the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;
network outages or security breaches;
general economic and market conditions;
customer renewal rates;
increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;
changes in our pricing policies or those of our competitors;
the mix of applications sold during a period;
seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter;
the timing and success of new application and service introductions by us or our competitors;
changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;
changes in laws and regulations that impact our business; and
the timing of expenses related to acquisitions and potential future charges for impairment of goodwill.

Because we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription services revenues from customers when control of the promised services is transferred, which typically occurs over a period of three years or longer. As a result, most of the subscription services revenues we report in each quarter are derived from the recognition of unearned revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscription contracts in any single quarter will likely have a minor impact on our revenue results for that quarter. However, such a decline will negatively affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our applications, and potential changes in our pricing policies or rate of renewals, may not be fully reflected in our results of operations until future periods. We may be unable to adjust our cost structure to reflect the changes in revenues. In addition, a significant majority of our costs are expensed as incurred, while revenues are recognized over the life of the customer agreement. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as subscription revenues from new customers generally are recognized over the applicable subscription term.
Our ability to predict the rate of customer subscription renewals or adoptions and the impact these renewals and adoptions will have on our revenues or operating results is limited.
As the markets for our applications mature, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. From time to time, we may also change our pricing structure, which could adversely impact demand for our products. Moreover, large customers, which are thea primary focus of our sales efforts, have and may demandcontinue to request greater price concessions.concessions and delayed payment terms. As a result of the COVID-19 pandemic, some of our existing and potential customers have, and may continue to defer purchasing decisions, request price concessions and delayed payment terms, and request other terms and conditions, especially if the COVID-19 pandemic worsens or is prolonged. As a result, in the future we may be required to reduce our prices or accept onerous terms and conditions, including delayed payment terms, which could adversely affect our revenues, gross margin, profitability, financial position, and cash flow.flows in any given period.
In addition, our customers have no obligation to renew their subscriptions for our applications after the expiration of either the initial or renewed subscription period. Our customers may renew for fewer elements of our applications or on different pricing terms. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our pricing or our applications and their ability to continue their operations and spending levels. If our customers do not renew their subscriptions for our applications on similar pricing terms, our revenues may decline, and our business could suffer. In addition, over time the average term of our contracts could change based on renewal rates or for other reasons.
Our future success also depends, in part, on our ability to sell additional features or enhanced elements of our applicationsproducts to our current customers.customers, and the success rate of such endeavors is difficult to predict, especially during the ongoing COVID-19 pandemic and with regard to any new lines of business that we may introduce from time to time. This may require increasingly costly marketing and sales efforts that are targeted at senior management. Ifmanagement, and if these efforts are not successful, our business and operating results may suffer.
Failure to adequately expand Additionally, acquisitions of our customers have and optimize our direct sales force will impede our growth.
We will need tocould continue to expand and optimize our sales infrastructure, both domestically and internationally, in orderlead to grow our customer base and our business. Identifying and recruiting qualified personnel and training them in the usecancellation of our software requires significant time, expensecontracts with those customers or by the acquiring companies, thereby reducing the number of our existing and attention. It can take significant time before our sales representatives are fully trained and productive. Our business may be adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenues. In particular, if we are unable to hire, develop and retain talented sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable periodpotential customers.
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If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread positive awareness of our brand is critical to achieving widespread acceptance of our applications, retaining and attracting new customers, and hiring and retaining employees. BrandHowever, brand promotion activities may not generate the customer awareness or increaseincreased revenues we anticipate, and even if they do, any increase in revenues may not offset the significant expenses we incur in building our brand. Moreover, the ongoing COVID-19 pandemic has made it more difficult to develop and maintain positive awareness of our brand. For example, we did not hold our two largest annual customer conferences for fiscal year 2021, Workday Rising and Workday Rising Europe. We also transitioned Adaptive Live, our customer experience for Workday Adaptive Planning customers as well as our global event series, Workday Elevate, from in-person to digital event experiences. In addition, we have and may continue to delay certain corporate advertising programs. These precautionary measures that have been adopted, particularly if extended for prolonged periods, could have increasingly negative effects on our ability to develop and maintain widespread positive awareness of our brand, which could harm our business, operating results, and financial condition. In addition, positions we take on social and ethical issues from time to time may impact our brand, reputation, or ability to attract or retain customers.
If we fail to successfully promote and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our applications. Additionally, the loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could significantly impair our ability to market our applications which, in turn, could have a negative impact on our revenues, reputation, and our ability to obtain new customers. In addition, if our brand is negatively impacted, it may be more difficult to hire and retain employees.

We have acquired, and may in the future acquire, other companies, employee teams, or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.
OurWe have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth dependsopportunities. For example, during the third quarter of fiscal 2019, we acquired Adaptive Insights, and during the fourth quarter of fiscal 2020, we acquired Scout. The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in part onidentifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
We may not be able to integrate acquired personnel, operations, and technologies successfully, or effectively manage the successcombined operations following any acquisition. We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:
•inability to integrate or benefit from an acquisition in a profitable manner;
•acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated;
•difficulty in integrating the intellectual property, technology infrastructure, and operations of the acquired business, including difficulty in addressing security issues of the acquired business;
•difficulty in integrating and retaining the personnel of the acquired business, including integration of the culture of the acquired company and Workday;
•difficulty in leveraging the data of the acquired business if it includes personal data;
•ineffective or inadequate controls, procedures, or policies at the acquired company;
•multiple product lines or service offerings, as a result of our strategicacquisitions, that are offered, priced, and supported differently;
•difficulties and additional expenses associated with synchronizing product offerings, customer relationships, and contract portfolio terms and conditions between Workday and the acquired business;
•potential unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters;
•adverse effects on our existing business relationships with third parties.business partners and customers as a result of the acquisition;
•potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers;
•inability to maintain relationships with key customers, suppliers, and partners of the acquired business;
•difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently;
•lack of experience in new markets, products, or technologies;
•difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific regulatory risks;
•diversion of management’s attention from other business concerns;
•use of resources that are needed in other parts of our business; and
•use of substantial portions of our available cash to consummate the acquisition.
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In orderaddition, a significant portion of the purchase price of companies we acquire may be allocated to growacquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our operating results.
Acquisitions could also result in dilutive issuances of equity securities or the issuance of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our business, operating results, and financial position may suffer.
Sales to customers outside the United States or with international operations expose us to risks inherent in global operations.
A key element of our growth strategy is to develop a worldwide customer base. Operating globally requires significant resources and management attention and will subject us to regulatory, economic, and political risks that are different from those in the United States. Our international expansion efforts may not be successful in creating demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the markets we anticipateenter. In addition to navigating the challenges related to the ongoing COVID-19 pandemic in foreign jurisdictions, we face other risks in doing business on a global scale that we will continuecould adversely affect our business, including:
•the need to dependlocalize and adapt our applications for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses;
•the need for a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;
•stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on relationships with third parties,us as a data processor;
•difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;
•difficulties in leveraging executive presence and company culture globally;
•different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues;
•new and different sources of competition;
•potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
•laws, customs, and business practices favoring local competitors;
•restrictive governmental actions focused on cross-border trade, such as deployment partners, technologyimport and content providersexport restrictions, duties, quotas, tariffs, trade disputes, and other key suppliers. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. Our competitorsbarriers or sanctions that may be effective in providing incentives to third parties to favor theirprevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to preventmonetary fines or reduce subscriptionspenalties in case of unintentional noncompliance due to factors beyond our services,control;
•compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, and data protection laws and regulations;
•increased compliance costs related to government regulatory reviews or in negotiating better rates or termsaudits, including those related to international cybersecurity requirements;
•increased financial accounting and reporting burdens and complexities;
•restrictions on the transfer of funds;
•ensuring compliance with key suppliers. In addition, acquisitionsanti-corruption laws, including the Foreign Corrupt Practices Act and UK Bribery Act;
•the effects of currency fluctuations on our partners byrevenues and expenses and customer demand for our competitors could result in a decrease in services;
•the number of our currentcost and potential customers, as our partners may no longer facilitateoutcomes of any international claims or litigation;
•adverse tax consequences and tax rulings; and
•unstable economic and political conditions.
Any of the adoption of our applications by potential customers.
If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our applications or increased revenues.
Adverse economic conditionsabove factors may negatively impact our business.
Our business depends on the overall demand for enterprise software and on the economic health of our current and prospective customers. Any significant weakening of the economy in the United States or Europe and of the global economy, more limited availability of credit, a reduction in business confidence and activity, decreased government spending, economic uncertainty and other difficulties, such as rising interest rates and increased inflation, may affect one or more of the sectors or countries in which weability to sell our applications.
The voteapplications and offer services globally, reduce our competitive position in foreign markets, increase our costs of the United Kingdom ("UK") to leave the EU, known as Brexit, has created substantial economicglobal operations, and political uncertainty, the impact of which depends on the terms of the UK's withdrawal from the EU, which may not be determined for several years or more. This uncertainty may cause some of our customers or potential customers to curtail spending, and may ultimately result in new regulatory and cost challenges to our UK and other international operations. In addition, a strong dollar could reduce demand for our applications and services from global customers. Additionally, the majority of our international costs are denominated in countries with relatively weakerlocal currencies and we anticipate that over time an increasing portion of our sales contracts outside the U.S. may be denominated in local currencies. Brexit has had an effect on global markets and currencies, including a declineTherefore, fluctuations in the value of the British pound as comparedU.S. dollar and foreign currencies may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to predict our future results accurately. Although we have a hedging program to help mitigate some of this volatility and related risks, there can be no assurance that the U.S. dollar. Thesehedging program will be effective in offsetting the adverse conditionsfinancial impacts that may result from unfavorable movements in foreign currency exchange rates, including any such movements caused by the COVID-19 pandemic.
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If we are not able to realize a return on the investments we have made toward entering new markets and new lines of business, our business and operating results could resultbe adversely affected.
We continue to seek opportunities to enter into new markets and/or new lines of business, some of which we may have very limited or no experience in. As an entrant to new markets and new lines of business, we may not be effective in reductions in salesconvincing prospective customers that our solutions will address their needs, and we may not accurately estimate our infrastructure needs, human resource requirements, or operating expenses with regard to these new markets and new lines of our applications, longer sales cycles, reductions in subscription duration and value, slowerbusiness. We may also fail to accurately anticipate adoption of new technologies and increased price competition. Anyrates of these events would likelynew lines of business or their underlying technology. For example, machine learning, artificial intelligence, and blockchain are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed. Also, we may not be able to properly price our solutions in these new markets, which could negatively affect our ability to sell to customers. Furthermore, customers in these new markets or of the new lines of business may demand more features and professional services, which may require us to devote even greater research and development, sales, support, and professional services resources to such customers. If we fail to generate adequate revenue from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business or financial condition.
Unfavorable laws, regulations, interpretive positions or standards governing new and evolving technologies that we incorporate into our products and services could result in significant cost and compliance challenges and adversely affect our business and operating results.
Some of our products and services, such as Workday’s People Experience and Talent Optimization product suites, currently utilize or will utilize new and evolving technologies such as machine learning, artificial intelligence, and blockchain. While existing laws and regulations may apply to these types of technologies, the overall regulatory environment governing these types of technologies is still currently undeveloped and likely to evolve as government interest in these technologies increases. Regulation of these technologies, as well as other technologies that we utilize in our products and services, also varies greatly among international, federal, state, and local jurisdictions and is subject to significant uncertainty. Governments and agencies domestic and abroad may in the future change or amend existing laws, or adopt new laws, regulations, or guidance, or take other actions which may severely impact the permitted uses of our technologies. Any failure by us to comply with applicable laws, regulations, guidance, or other rules could result in costly litigation, penalties, or fines. In addition, these regulations and any related enforcement actions could establish and further expand our obligations to customers, individuals, and other third parties with respect to our products and services, limit the countries in which such products and services may be used, restrict the way we structure and operate our business, require us to divert development and other resources, and reduce the types of customers and individuals who can use our products and services. Increased regulation and oversight of products or services which utilize or rely on these technologies may result in costly compliance burdens or otherwise increase our operating costs, detrimentally affecting our business. These new technologies could subject us to additional litigation brought by private parties, which could be costly, time-consuming, and distracting to management and could result in substantial expenses and losses.
In addition, as with many innovations, machine learning and artificial intelligence present additional risks and challenges that could affect their adoption and therefore our business. For example, the development of machine learning and artificial intelligence present emerging ethical issues, and if we enable or offer solutions on this front that are controversial, due to their impact, or perceived impact, on human rights, privacy, employment, or in other social contexts, we may experience brand or reputational harm, competitive harm, or legal liability. Also, our positions on social and ethical issues may impact our ability to attract or retain customers and other users. In particular, our brand and reputation are associated with our public commitments to sustainability, equality, inclusivity, accessibility, and ethical use, and any perceived changes in our dedication to these commitments could impact our relationships with potential and current customers and other users.
We have a history of cumulative net losses, and we do not expect to be profitable on a GAAP basis for the foreseeable future.
We have incurred significant net losses on a GAAP basis in each period since our inception in 2005. These net losses and our accumulated deficit reflect the substantial investments we make to acquire new customers and develop our applications. We expect our operating expenses to increase in the future due to anticipated increases in sales and marketing expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect our net losses on a GAAP basis to continue for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we also expect to incur increased net losses in the acquisition period because costs associated with acquiring customers are generally incurred up front, while subscription services revenue is generally recognized ratably over the terms of the agreements, which are typically three years or longer. You should not consider our recent growth in revenues as indicative of our future performance. We cannot ensure that we will achieve GAAP profitability in the future or that, if we do become profitable, we will sustain profitability.
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We are subject to risks associated with our equity investments including partial or complete loss of invested capital, and significant changes in the fair value of this portfolio could adversely impact our financial results.
We invest in early to late stage companies for strategic reasons and to support key business initiatives, and we may not realize a return on our equity investments. Many such companies generate net losses and the market for their products, services, or technologies may be slow to develop or never materialize. These companies are often dependent on the availability of later rounds of financing from banks or investors on favorable terms to continue their operations. The financial success of our investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition, or other favorable market event reflecting appreciation to the cost of our initial investment. The capital markets for public offerings and acquisitions are dynamic and the likelihood of liquidity events for the companies we have invested in could deteriorate, which could result in a loss of all or a substantial part of our investment in these companies.
Further, valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data. In addition, we may experience additional volatility to our statements of operations due to changes in market prices of our marketable equity investments, the valuation and timing of observable price changes or impairments of our non-marketable equity investments, including impairments to such investments due to the COVID-19 pandemic, and changes in the proportionate share of earnings and losses or impairment of our equity investments accounted for under the equity method. This volatility could be material to our results in any given quarter and financial position.may cause our stock price to decline.
Any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, suppliers, partners, and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. While we have patent applications pending in the United States and throughout the world, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties, including those affiliated with state-sponsored actors, to copy or reverse engineer our applications, including with the assistance of insiders, and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of jurisdictions outside the United States. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our applications and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our applications.
We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect, and enforce our intellectual property rights could seriously adversely affecthave a serious adverse effect on our brand and our business.
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We may be sued by third parties for alleged infringement of their proprietary rights.
There is considerable patent and other intellectual property development activity in our industry. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time to time, third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. In the future, they may claim that our applications and underlying technology infringe or violate their intellectual property rights, even if we are unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, require us to change our products, technology, or business practices, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications, or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.

Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims.
Some of our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Some of our applications include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our applications. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be impacted by an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third partythird-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
We employ third-party licensed software for use in orare subject to risks related to government contracts and related procurement regulations, which may adversely impact our business and operating results.
Our contracts with federal, state, local, and foreign government entities are subject to various procurement regulations and other requirements relating to their formation, administration and performance. We may be subject to audits and investigations relating to our applications,government contracts, and the inability to maintain these licenses or errors in the software we licenseany violations could result in increased costs,various civil and criminal penalties and administrative sanctions, including termination of contracts, refunding or reduced service levels,suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for termination by the government at any time, without cause, and termination of any such contract may adversely impact our other existing or prospective government contracts. Any of these risks related to contracting with governmental entities could adversely impact our business and operating results.
We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which wouldcould adversely affect our profitability.
As of October 31, 2020, we had federal and state net operating loss carryforwards due to prior period losses. If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2022, and 2041. The federal net operating losses generated in and after fiscal 2018 do not expire and may be carried forward indefinitely. We also have federal research tax credit carryforwards, which if not utilized will begin to expire in fiscal 2022. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
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Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our customers, which could increase the costs of our services and adversely impact our business.
We operate and are subject to taxes in the United States and numerous other jurisdictions throughout the world. Changes to federal, state, local, or international tax laws on income, sales, use, indirect, or other tax laws, statutes, rules, regulations, or ordinances on multinational corporations are currently being considered by the United States and other countries where we do business. These contemplated legislative initiatives include, but are not limited to, changes to transfer pricing policies and definitional changes to permanent establishment that could be applied solely or disproportionately to services provided over the internet. These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts. Existing tax laws, statutes, rules, regulations, or ordinances could also be interpreted, changed, modified, or applied adversely to our customers (possibly with retroactive effect), which could require our customers to pay additional tax amounts with respect to services we have provided, fines or penalties, and interest for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows. If our customers must pay additional fines or penalties, it could adversely affect demand for our services.
Risks Related to Our Class A Common Stock
Our applications incorporateChairman and co-CEO have control over key decision making as a result of their control of a majority of our voting stock.
As of October 31, 2020, our co-founder and Chairman David Duffield, together with his affiliates, held voting rights with respect to approximately 50 million shares of Class B common stock and 0.2 million shares of Class A common stock. As of October 31, 2020, our co-founder and co-CEO Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.3 million shares of Class A common stock. In addition, Mr. Bhusri holds 0.1 million RSUs, which will be settled in an equivalent number of shares of Class A common stock. Further, Messrs. Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain third-party software obtained under licenses fromClass B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our initial public offering. Messrs. Duffield and Bhusri have each initially designated the other companies. We anticipate that we willas their respective proxies. Accordingly, upon the death or incapacity of either Mr. Duffield or Mr. Bhusri, the other would individually continue to rely on such third-party softwarecontrol the voting of shares subject to the voting proxy. Collectively, the shares described above represent a substantial majority of the voting power of our outstanding capital stock. As a result, Messrs. Duffield and development tools from third partiesBhusri have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, they have the ability to control the management and affairs of our company as a result of their positions as our Chairman and co-CEO, respectively, and their ability to control the election of our directors. Mr. Duffield, in his capacity as a board member, and Mr. Bhusri, in his capacity as a board member and officer, each owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the future. Although we believe that therebest interests of our stockholders. As stockholders, even as controlling stockholders, they are commercially reasonable alternativesentitled to the third-party software we currently license, thisvote their shares in their own interests, which may not always be in the case,interests of our stockholders generally.
The dual class structure of our common stock has the effect of concentrating voting control with our Chairman and co-CEO, and also with other executive officers, directors, and affiliates; this will limit or itpreclude the ability of non-affiliates to influence corporate matters.
Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share. Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of October 31, 2020. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (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. This concentrated control will limit or preclude the ability of non-affiliates to influence corporate matters for the foreseeable future.
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Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, Mr. Duffield and Mr. Bhusri retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, continue to control a majority of the combined voting power of our Class A common stock and Class B common stock.
Our stock price has been volatile in the past and may be difficultsubject to volatility in the future.
The trading price of our Class A common stock has been volatile historically and could be subject to wide fluctuations in response to various factors described below. These factors, as well as the volatility of our Class A common stock, could also impact the price of our convertible senior notes. Further, the trading price of our Class A common stock has fluctuated significantly and may continue to fluctuate as a result of the COVID-19 pandemic and associated economic downturn. The extent to which, and for how long the COVID-19 pandemic may continue to impact the trading price of our Class A common stock is uncertain. Additional risk factors that may affect the trading price of our securities, some of which are beyond our control and further magnified by the ongoing COVID-19 pandemic, include:
•overall performance of the equity markets;
•fluctuations in the valuation of companies perceived by investors to be comparable to us, such as high-growth or costlycloud companies, or in valuation metrics, such as our price to replace. Our userevenues ratio;
•guidance as to our operating results that we provide to the public, differences between our guidance and market expectations, our failure to meet our guidance, or changes in recommendations by securities analysts that follow our securities;
•announcements of additionaltechnological innovations, new applications or alternative third-partyenhancements to services, acquisitions, strategic alliances, or significant agreements by us or by our competitors;
•announcements of negative corporate developments by our competitors and other high-growth or cloud companies including, among other things, any announcements related to security incidents;
•disruptions in our services due to computer hardware, software, wouldor network problems;
•announcements of customer additions and customer cancellations or delays in customer purchases;
•recruitment or departure of key personnel;
•the economy as a whole, political and regulatory uncertainty, and market conditions in our industry, and the industries of our customers;
•trading activity by directors, executive officers and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
•the exercise of rights held by certain of our stockholders, subject to some conditions, to require us to enter into license agreementsfile registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders;
•the size of our market float and significant stock option exercises;
•any future issuances of securities;
•sales and purchases of any Class A common stock issued upon conversion of our convertible senior notes or in connection with third parties.the convertible note hedge and warrant transactions related to such convertible senior notes;
•our operating performance and the performance of other similar companies; and
•the sale or availability for sale of a large number of shares of our Class A common stock in the public market.
Additionally, the stock markets have at times experienced extreme price and volume fluctuations that have affected and may in the future affect the market prices of equity securities of many companies. These fluctuations have, in some cases, been unrelated or disproportionate to the operating performance of these companies. Further, the trading prices of publicly traded shares of companies in our industry have been particularly volatile and may be very volatile in the future.
In the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
We have substantial indebtedness which may adversely affect our financial condition and operating results.
In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022. As a result of this offering, we incurred $1.15 billion principal amount of indebtedness, which we may be required to pay at maturity in 2022, or upon the occurrence of a fundamental change (as defined in the indenture). In addition, integrationin April 2020, we entered into a credit agreement that provided for a term loan in an aggregate original principal amount of $750 million and a revolving credit facility in an aggregate principal amount of $750 million. As of October 31, 2020, there was $741 million outstanding under the term loan facility.
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We may incur substantial additional debt in the future, some of which may be secured debt. There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all. Our ability to pay cash upon conversion or repurchase of the software used2022 Notes may be limited by law, regulatory authority, or agreements governing our future indebtedness and is dependent on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Any future debt may also contain limitations on our ability to pay cash upon a conversion request or repurchase upon a fundamental change.
In addition, our indebtedness could, among other things:
•make it difficult for us to pay other obligations;
•make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements, or other purposes;
•adversely affect our liquidity and result in a material adverse effect on our financial position upon repayment of the indebtedness;
•require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes;
•limit our flexibility in planning for and reacting to changes in our applicationsbusiness; and
•negatively impact our credit rating, which could affect our business.
Our credit agreement also imposes restrictions on us and requires us to maintain compliance with new third-party softwarespecified covenants, including a specific leverage ratio. Our ability to comply with these covenants may require significant workbe affected by events beyond our control. If we breach any of the covenants and require substantial investmentdo not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
The convertible note hedge and warrant transactions may affect the value of our time and resources. ToClass A common stock.
In connection with the sale of our convertible notes, we entered into convertible note hedge transactions with institutions that we refer to as the option counterparties. We also entered into warrant transactions with the option counterparties pursuant to which we sold warrants for the purchase of our Class A common stock. The convertible note hedge transactions are expected to offset the potential dilution to our Class A common stock upon any conversion of the convertible notes. The warrant transactions could separately have a dilutive effect to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionalitymarket price per share of our applications,Class A common stock exceeds the exercise price of the relevant warrants.
The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the convertible notes. This activity could suppress or inflate the market price of our Class A common stock.
We will also be subject to the risk that these option counterparties may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. If one or more of the option counterparties to one or more of our convertible note hedge transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price of our Class A common stock during the related settlement period. In addition, upon a default by one of the option counterparties, we may suffer dilution with respect to our Class A common stock as well as adverse financial consequences.
Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law (“DGCL”) may discourage, delay, new application introductions,or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of Workday more difficult, including the following:
•any transaction that would result in a failurechange in control of our applicationscompany requires the approval of a majority of our outstanding Class B common stock voting as a separate class;
•our dual class common stock structure, which provides our co-founders with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and injure Class B common stock;
•our reputation.board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;
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•when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock:
◦certain amendments to our restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;
◦our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and
◦vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;
•only our chairman of the board, co-chief executive officers, president, or a majority of our board of directors are authorized to call a special meeting of stockholders;
•certain litigation against us can only be brought in Delaware;
•we will have two classes of common stock until the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (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;
•our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of Class A common stock; and
•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could depress the market price of our securities.
The exclusive forum provision in our organizational documents may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
Our restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. There is uncertainty as to whether a court would enforce this exclusive forum provision with respect to claims under the Securities Act of 1933, as amended (“Securities Act”). If a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
In April 2020, we amended and restated our bylaws to provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
In addition, neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Securities Exchange Act of 1934, as amended (“Exchange Act”). Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations relatedpromulgated thereunder.
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Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the InternetFederal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for disputes with us or changesour directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
We do not intend to pay dividends for the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the Internet infrastructure itselfforeseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.
General Risk Factors
Adverse economic conditions may diminishnegatively impact our business.
Our business depends on the overall demand for enterprise software and on the economic health of our current and prospective customers. Any significant weakening of the economy in the United States or abroad, limited availability of credit, reduction in business confidence and activity, decreased government spending, or economic uncertainty, all of which are being impacted by the ongoing COVID-19 pandemic, and its effects such as unemployment, may continue to affect one or more of the sectors or countries in which we sell our applications. Alternatively, a strong dollar could reduce demand for our applications and could have a negative impact on our business.services in countries with relatively weaker currencies.
Federal, state or foreign government bodies or agencies haveAlso, the withdrawal of the UK from the EU (“Brexit”) has created economic and political uncertainty, including volatility in the past adopted,value of foreign currencies. The impact of Brexit depends on the terms of the UK’s future trade agreements with the EU and other countries and such impact may not be fully realized for several years or more. This uncertainty may cause some of our customers or potential customers to curtail spending and may ultimately result in the future adopt, laws or regulations relatingnew regulatory, operational, and cost challenges to Internet usage. Changesour UK and global operations.
These adverse conditions could continue to result in these laws or regulations could require us to modifyreductions in sales of our applications, longer sales cycles, reductions in order to comply with these laws or regulations. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the Internet or commerce conducted via the Internet. These laws or charges could limit the growth of Internet-related commerce or communications, or negatively impact demand for Internet-based applications such as ours.
In addition, businesses could be adversely affected due to delays in the development orsubscription duration and value, customer bankruptcies, slower adoption of new standardstechnologies, and protocolsincreased price competition. Any of these events would likely have an adverse effect on our business, operating results, and financial position.
Catastrophic events may disrupt our business.
Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, Europe, and Asia. The west coast of the United States contains active earthquake zones and the southeast is subject to handle increased demands of Internet activity, security, reliability, cost, ease of use, accessibility,seasonal hurricanes. Additionally, we rely on our network and quality of service. Businesses have been adversely affected by "viruses," "worms"third-party infrastructure and similar malicious programsenterprise applications, internal technology systems, and have experiencedour website for our development, marketing, operational support, hosted services, and sales activities. We also rely on AWS’s, Dimension Data’s, Microsoft Azure’s, and Google Public Cloud's distributed computing infrastructure platforms that are located in a wide variety of outagesregions. In the event of a major earthquake, hurricane, or other natural disaster or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, pandemics or other public health emergencies (including the ongoing COVID-19 pandemic), or the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and othersea level rise), we may be unable to continue our operations and may endure system interruptions, delays as a resultin our product development, lengthy interruptions in our services, breaches of damage to Internet infrastructure. These issuesdata security, and loss of critical data, all of which could negatively impact demand forcause reputational harm or otherwise have an adverse effect on our cloud-based applications.business and operating results.
We may discover weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities.
As a public company, we are required to design and maintain proper and effective internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.


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The process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 is challenging and costly. In the future, we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the NASDAQ Global Select Market,Financial Industry Regulatory Authority, the SEC, or other regulatory authorities, which could require additional financial and management resources. In addition, because we use Workday'sWorkday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.
As of October 31, 2017, we had federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in fiscal 2026 and 2018 for federal and state purposes, respectively. We also have federal research tax credit carryforwards, which if not utilized will begin to expire in fiscal 2026. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an "ownership change." A Section 382 "ownership change" generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our customers, which could increase the costs of our services and adversely impact our business.
We operate and are subject to taxes in the United States and numerous foreign jurisdictions throughout the world. Changes to federal, state, local or international tax laws on income, sales, use, indirect or other tax laws, statutes, rules, regulations or ordinances on multinational corporations are currently being considered by the United States and other countries where we do business. These contemplated legislative initiatives include, but not limited to, changes to transfer pricing policies and definitional changes to permanent establishment could be applied solely or disproportionately to services provided over the Internet. These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, and fines or penalties and interest for past amounts. Existing tax laws, statutes, rules, regulations or ordinances could also be interpreted, changed, modified or applied adversely to our customers (possibly with retroactive effect), which could require our customers to pay additional tax amounts with respect to services we have provided, and fines or penalties and interest for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows. If our customers must pay additional fines or penalties, it could adversely affect demand for our services.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.
We have broad discretion in the use of our cash balances and may not use them effectively.
We have broad discretion in the use of our cash balances and may not use them effectively. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest our cash balances in a manner that does not produce income or that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the price of our securities.

Risks Related to Our Class A Common Stock
Our Chairman and CEO have control over key decision making as a result of their control of a majority of our voting stock.
As of October 31, 2017, our co-founder and Chairman David Duffield, together with his affiliates, held voting rights with respect to approximately 61 million shares of Class B common stock, 0.1 million shares of Class A common stock, and less than 0.1 million RSUs. As of October 31, 2017, our co-founder and CEO Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.1 million shares of Class A common stock. Of the Class B shares held by Mr. Bhusri, approximately 0.1 million shares are subject to time-based vesting. In addition, Mr. Bhusri holds exercisable options to acquire approximately 2 million shares of Class B common stock and 0.2 million RSUs which will be settled in an equivalent number of shares of Class A common stock. Further, Messrs. Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our IPO. Messrs. Duffield and Bhusri have each initially designated the other as their respective proxies. Accordingly, upon the death or incapacity of either Mr. Duffield or Mr. Bhusri, the other would individually continue to control the voting of shares subject to the voting proxy. Collectively, the shares described above represent a substantial majority of the voting power of our outstanding capital stock. As a result, Messrs. Duffield and Bhusri have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, they have the ability to control the management and affairs of our company as a result of their positions as our Chairman and CEO, respectively, and their ability to control the election of our directors. Mr. Duffield, in his capacity as a board member, and Mr. Bhusri, in his capacity as a board member and officer, each owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.
The dual class structure of our common stock has the effect of concentrating voting control with our Chairman and CEO, and also with other executive officers, directors and affiliates; this will limit or preclude the ability of non-affiliates to influence corporate matters.
Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share. Stockholders who hold shares of Class B common stock, including our executive officers, directors and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of October 31, 2017. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 11, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (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. This concentrated control will limit or preclude the ability of non-affiliates to influence corporate matters for the foreseeable future.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, our Chairman and CEO retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, continue to control a majority of the combined voting power of our Class A common stock and Class B common stock.
Our stock price has been volatile in the past and may be subject to volatility in the future.
The trading price of our Class A common stock has been volatile historically, and could be subject to wide fluctuations in response to various factors described below. These factors, as well as the volatility of our Class A common stock, could also impact the price of our convertible senior notes. The factors that may affect the trading price of our securities, some of which are beyond our control, include:
overall performance of the equity markets;
fluctuations in the valuation of companies perceived by investors to be comparable to us, such as high-growth or cloud companies, or in valuation metrics, such as our price to revenues ratio;
guidance as to our operating results that we provide to the public, differences between our guidance and market expectations, our failure to meet our guidance or changes in recommendations by securities analysts that follow our securities;
announcements of technological innovations, new applications or enhancements to services, acquisitions, strategic alliances or significant agreements by us or by our competitors;

disruptions in our services due to computer hardware, software or network problems;
announcements of customer additions and customer cancellations or delays in customer purchases;
recruitment or departure of key personnel;
the economy as a whole, market conditions in our industry, and the industries of our customers;
trading activity by directors, executive officers and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
the exercise of rights held by certain of our stockholders, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders;
the size of our market float and significant option exercises;
any future issuances of securities;
sales and purchases of any Class A common stock issued upon conversion of our convertible senior notes or in connection with the convertible note hedge and warrant transactions related to such convertible senior notes;
our operating performance and the performance of other similar companies; and
the sale or availability for sale of a large number of shares of our Class A common stock in the public market.
Additionally, the stock markets have at times experienced extreme price and volume fluctuations that have affected and may in the future affect the market prices of equity securities of many companies. These fluctuations have, in some cases, been unrelated or disproportionate to the operating performance of these companies. Further, the trading prices of publicly traded shares of companies in our industry have been particularly volatile and may be very volatile in the future.
In the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
We have indebtedness in the form of convertible senior notes.
In June 2013, we completed an offering of $350 million of 2018 Notes, and we concurrently issued an additional $250 million of 2020 Notes. In September 2017, we completed an offering of $1.15 billion of 2022 Notes.
As a result of these convertible notes offerings, we incurred $350 million principal amount of indebtedness, which we may be required to pay at maturity in 2018, $250 million principal amount of indebtedness, which we may be required to pay at maturity in 2020, and $1.15 billion principal amount of indebtedness, which we may be required to pay at maturity in 2022, or upon the occurrence of a fundamental change (as defined in the applicable indenture). There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all. In addition, this indebtedness could, among other things:
make it difficult for us to pay other obligations;
make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes; and
limit our flexibility in planning for and reacting to changes in our business.
Exercise of the warrants associated with our 2018 Notes, 2020 Notes, or 2022 Notes may affect the price of our Class A common stock.
In connection with our offering of the 2018 Notes, we sold warrants to acquire up to approximately 4.2 million shares of our Class A common stock at an initial strike price of $107.96, which become exercisable beginning on October 15, 2018. In connection with our offering of the 2020 Notes, we sold warrants to acquire up to approximately 3.1 million shares of our Class A common stock at an initial strike price of $107.96, which become exercisable beginning on October 15, 2020. In connection with our offering of the 2022 Notes, we sold warrants to acquire up to approximately 7.8 million shares of our Class A common stock at an initial strike price of $213.96, which become exercisable beginning on January 1, 2023. The warrants may be settled in shares or in cash. The exercise of the warrants could have a dilutive effect if the market price per share of our Class A common stock exceeds the strike price of the warrants. The counterparties to the warrant transactions and note hedge transactions relating to the Notes are likely to enter into or unwind various derivative instruments with respect to our Class A common stock or purchase or sell shares of our Class A common stock or other securities linked to or referencing our Class A common stock in secondary market transactions prior to the respective maturity of the Notes. These activities could adversely affect the trading price of our Class A common stock.

Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:
any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class;
our dual class common stock structure, which provides our chairman and CEO with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;
our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;
when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock:
certain amendments to our restated certificate of incorporation or restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;
our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and
vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;
only our chairman of the board, chief executive officer, either co-president, or a majority of our board of directors are authorized to call a special meeting of stockholders;
certain litigation against us can only be brought in Delaware;
we will have two classes of common stock until the date that is the first to occur of (i) October 11, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (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;
our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of Class A common stock; and
advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could depress the market price of our securities.
If securities or industry analysts publish inaccurate or unfavorable research about our business, or discontinue publishing research about our business, the price and trading volume of our securities could decline.
The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our securities to decline.
We do not intend to pay dividends for the foreseeable future.
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We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion
Table of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of UnregisteredEquity Securities
Information relatingDuring the three months ended October 31, 2020, we issued 0.2 million shares of our unregistered Class A common stock to warrant holders who net exercised their warrants related to the issuance2020 Notes. This share amount represents the number of warrants exercised multiplied by the difference between the exercise price of the 2022warrants and their daily volume weighted-average stock price.
For further information regarding the above transactions, see Note 10, Debt, of the Notes was providedto Condensed Consolidated Financial Statements included in CurrentPart I, Item 1 of this Quarterly Report on Form 8-K dated September 15, 2017.10-Q. These shares of our Class A common stock were issued in an exchange pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. We did not receive any proceeds from the warrant exercises, nor were they subject to underwriting discounts or commissions.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Table of Contents
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.

ITEM 6. EXHIBITS
The Exhibits listed below are filed as part of this Form 10-Q.
Incorporation by Reference
Exhibit NumberFormFile NumberFiling DateExhibit NumberFiled Herewith
10.1†X
31.1X
31.2X
31.3X
32.1X
32.2X
32.3X
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)X
101.SCHInline XBRL Taxonomy Schema Linkbase DocumentX
101.CALInline XBRL Taxonomy Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Labels Linkbase DocumentX
101.PREInline XBRL Taxonomy Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)X
†Indicates a management contract or compensatory plan.

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   Incorporation by Reference
Exhibit
Number
  Form File No. Filing Date Exhibit No. Filed Herewith
4.1 
Indenture dated September 15, 2017 between Workday, Inc. and Wells Fargo Bank, National Association
8-K 001-35680 September 15, 2017 4.1  
10.1 
Form of Convertible Bond Hedge Confirmation
8-K 001-35680 September 15, 2017 99.1  
10.2 
Form of Warrant Confirmation
8-K 001-35680 September 15, 2017 99.2  
10.3 
Form of Additional Convertible Bond Hedge Confirmation
8-K 001-35680 September 15, 2017 99.3  
10.4 
Form of Additional Warrant Confirmation
8-K 001-35680 September 15, 2017 99.4  
31.1 
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
        X
31.2 
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
        X
32.1 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
        X
32.2 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
        X
101.INS XBRL Instance Document        X
101.SCH XBRL Taxonomy Schema Linkbase Document        X
101.CAL XBRL Taxonomy Calculation Linkbase Document        X
101.DEF XBRL Taxonomy Definition Linkbase Document        X
101.LAB XBRL Taxonomy Labels Linkbase Document        X
101.PRE XBRL Taxonomy Presentation Linkbase Document        X

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 30, 2017
20, 2020
Workday, Inc.
Workday, Inc.
/s/ Robynne D. Sisco
Robynne D. Sisco
President and Chief Financial Officer

(Principal Financial Officer)

Exhibit Index
69
    Incorporation by Reference
Exhibit
Number
   Form File No. Filing Date Exhibit No. Filed Herewith
4.1 
Indenture dated September 15, 2017 between Workday, Inc. and Wells Fargo Bank, National Association
 8-K 001-35680 September 15, 2017 4.1  
10.1 
Form of Convertible Bond Hedge Confirmation
 8-K 001-35680 September 15, 2017 99.1  
10.2 
Form of Warrant Confirmation
 8-K 001-35680 September 15, 2017 99.2  
10.3 
Form of Additional Convertible Bond Hedge Confirmation
 8-K 001-35680 September 15, 2017 99.3  
10.4 
Form of Additional Warrant Confirmation
 8-K 001-35680 September 15, 2017 99.4  
31.1 
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
         X
31.2 
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
         X
32.1 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
32.2 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
101.INS XBRL Instance Document         X
101.SCH XBRL Taxonomy Schema Linkbase Document         X
101.CAL XBRL Taxonomy Calculation Linkbase Document         X
101.DEF XBRL Taxonomy Definition Linkbase Document         X
101.LAB XBRL Taxonomy Labels Linkbase Document         X
101.PRE XBRL Taxonomy Presentation Linkbase Document         X



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