Workday Inc

Previous wording

Workday delivers applications for financial management, spend management, human capital management, planning, and analytics. With Workday, our customers have a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations. Our diverse customer base includes medium-sized and large, global organizations within numerous industry categories, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality.

Current wording

Workday is a leading platform that helps organizations manage their two most important assets - their people and money. We deliver cloud-based applications for financial management, human capital management, planning, spend management, and analytics. Our diverse customer base includes medium-sized and large, global organizations within numerous industry categories, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality. With Workday, our customers have a unified platform with AI built into its core that can help them deliver better employee experiences, improve operational efficiencies, and provide insights for faster, data-driven decision-making.

Previous wording

We have achieved significant growth since our inception in 2005. Our current financial focus is on growing our revenues, operating margin, and operating cash flows, and expanding both our customer base and our footprint within our existing customers. While we have a history of GAAP operating losses prior to fiscal 2024, 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 expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will 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.

Current wording

We are continuing to focus on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease over the longer term as we grow our revenues and invest in a disciplined manner to support our long-term growth initiatives.

Previous wording

Recent macroeconomic events including higher inflation and interest rates, as well as geopolitical factors including the Russia-Ukraine and Israel-Hamas conflicts, have negatively impacted the global economy and created continued uncertainty, volatility, and disruption of financial markets. Despite this, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human capital and finance digital transformation journeys. Demand for our products remains strong, we continue to achieve solid new subscription bookings, and our near-term revenues are relatively predictable as a result of our subscription-based business model.

Current wording

Recent macroeconomic events including elevated inflation and fluctuating interest rates, as well as geopolitical factors including the Russia-Ukraine and Israel-Hamas conflicts, have negatively impacted the global economy and created continued uncertainty, volatility, and disruption of financial markets. Despite this, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human capital and finance digital transformation journeys. Demand for our products remains strong, we continue to achieve solid new subscription bookings, and our near-term revenues are relatively predictable as a result of our subscription-based business model.

Previous wording

We have experienced, and may continue to experience, a moderation of revenue growth rates due to increased deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, and lower headcount level commitments upon renewals of existing customers. Further, we have provided, and may continue to provide, certain customers with more flexible payment terms. If the economic uncertainty continues, we may also experience additional negative impacts on customer renewals, customer collections, sales and marketing efforts, customer deployments, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results. For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Current wording

We have experienced, and may continue to experience, a moderation of revenue growth rates due to increased deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, and reduced growth in headcount level commitments upon renewals of existing customers. Further, we have provided, and may continue to provide, certain customers with more flexible payment terms. If the economic uncertainty continues, we may also experience additional negative impacts on customer renewals, customer collections, sales and marketing efforts, customer deployments, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results. For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Previous wording

Subscription services revenues accounted for approximately 91% of our total revenues for the three months ended April 30, 2024, and represented 96% of our total unearned revenue as of April 30, 2024. Subscription services revenues are 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.

Current wording

Subscription services revenues accounted for approximately 91% of our total revenues for the three and six months ended July 31, 2024, and represented 96% of our total unearned revenue as of July 31, 2024. Subscription services revenues are 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.

Previous wording

As of April 30, 2024, our total subscription revenue backlog was $20.7 billion, with $6.6 billion and $11.6 billion expected to be recognized in revenues over the next 12 and 24 months, respectively. As of April 30, 2023, our total subscription revenue backlog was $16.7 billion, with $5.6 billion and $9.8 billion expected to be recognized in revenues over the next 12 and 24 months, respectively. The increase in subscription revenue backlog was primarily driven by an increased number of new customers, timing of renewals for existing customers, expansion of our product offerings sold to existing customers, and longer duration of customer contracts.

Current wording

As of July 31, 2024, our total subscription revenue backlog was $21.6 billion, with $6.8 billion expected to be recognized in revenues over the next 12 months. As of July 31, 2023, our total subscription revenue backlog was $17.8 billion, with $5.9 billion expected to be recognized in revenues over the next 12 months. The increase in subscription revenue backlog was primarily driven by expansion within our existing customer base, sales to new customers, timing of renewals for existing customers, and longer duration of customer contracts.

Previous wording

Our costs and expenses for the three months ended April 30, 2024, and 2023, were as follows (in millions):

Current wording

Our costs and expenses were as follows (in millions):

Previous wording

Costs of subscription services were $290 million for the three months ended April 30, 2024, compared to $239 million for the prior year period, an increase of $51 million, or 21%. The increase in costs of subscription services included increases of $36 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount and $9 million in expenses for data center capacity.

Current wording

Costs of subscription services were $304 million for the three months ended July 31, 2024, compared to $256 million for the prior year period, an increase of $48 million, or 19%. The increase in costs of subscription services included increases of $32 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, and $9 million in depreciation.

Previous wording

Total costs and expenses were $1.9 billion for the three months ended April 30, 2024, compared to $1.7 billion for the prior year period, an increase of $222 million, or 13%. The increase in GAAP operating expenses included increases of $154 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, $17 million in professional services and subcontractor expenses, $11 million in expenses for data center capacity, and $11 million in amortization of deferred sales commissions due to increased sales.

Current wording

Costs of subscription services were $594 million for the six months ended July 31, 2024, compared to $495 million for the prior year period, an increase of $100 million, or 20%. The increase in costs of subscription services included increases of $67 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, $17 million in depreciation, and $12 million in expenses for data center capacity.

Previous wording

Product development expenses were $656 million for the three months ended April 30, 2024, compared to $600 million for the prior year period, an increase of $56 million, or 9%. The increase in product development expenses included an increase of $49 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount.

Current wording

Product development expenses were $649 million for the three months ended July 31, 2024, compared to $610 million for the prior year period, an increase of $39 million, or 6%. The increase in product development expenses included an increase of $29 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount.

Previous wording

General and administrative expenses were $208 million for the three months ended April 30, 2024, compared to $168 million for the prior year period, an increase of $41 million, or 25%. The increase in general and administrative expenses included increases of $27 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount and $8 million in realignment costs.

Current wording

General and administrative expenses were $203 million for the three months ended July 31, 2024, compared to $169 million for the prior year period, an increase of $34 million, or 20%. The increase in general and administrative expenses included increases of $15 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, and $11 million in professional services and subcontractor expenses.

Previous wording

We expect general and administrative expenses will continue to increase in absolute dollars as we invest in our general and administrative organizations to support business growth.

Current wording

We expect general and administrative expenses will continue to increase in absolute dollars as we continue to grow our business and invest in our infrastructure, people, and systems to support our global operations.

Previous wording

Share-based compensation expenses increased by $16 million for the three months ended April 30, 2024, compared to the prior year period, primarily due to additional grants to new and existing employees.

Current wording

Share-based compensation expenses increased by $18 million for the three months ended July 31, 2024, compared to the prior year period, primarily due to additional grants to new and existing employees.

Previous wording

Non-GAAP operating income increased from $396 million, or 23.5% of revenues, for the three months ended April 30, 2023, to $515 million, or 25.9% of revenues, for the three months ended April 30, 2024, primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.

Current wording

Non-GAAP operating income was $1.0 billion, or 25.4% of revenues, for the six months ended July 31, 2024, compared to the prior year non-GAAP operating income of $817 million, or 23.5% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.

Previous wording

Other income, net increased by $33 million for the three months ended April 30, 2024, compared to the prior year period, primarily driven by an increase in interest income on our marketable securities from higher investment balances and increased interest rates.

Current wording

Other income, net increased by $12 million and $44 million for the three and six months ended July 31, 2024, compared to the prior year periods. The increases were primarily driven by additional interest income earned on our marketable debt securities from higher investment balances and increased interest rates.

Previous wording

The income tax provision for the three months ended April 30, 2024, was primarily attributable to earnings in U.S. and profitable foreign jurisdictions, offset by the excess tax benefit from stock-based compensation.

Current wording

The income tax provision for the six months ended July 31, 2024, was primarily attributable to earnings in U.S. and profitable foreign jurisdictions, offset by the excess tax benefit from stock-based compensation.

Previous wording

The income tax provision for the three months ended April 30, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and an increase in U.S. taxes due to capitalized research and development expenditures.

Current wording

The income tax provision for the six months ended July 31, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and capitalized research and development expenditures in the U.S.

Previous wording

As of April 30, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $7.2 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, commercial paper, money market funds, and U.S. agency obligations. We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock.

Current wording

As of July 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $7.4 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, commercial paper, money market funds, and U.S. agency obligations. We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock.

Previous wording

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, and debt repayment needs over the next 12 months and beyond.

Current wording

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, share repurchase, and debt repayment needs over the next 12 months and beyond.

Previous wording

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the timing and costs associated with the construction or acquisition of additional facilities, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing.

Current wording

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing.

Previous wording

Cash provided by operating activities was $372 million and $277 million for the three months ended April 30, 2024, and 2023, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections and interest received from marketable debt securities, offset by higher cash paid for employee-related expenses primarily due to higher average headcount.

Current wording

Cash provided by operating activities was $571 million and $425 million for the three months ended July 31, 2024, and 2023, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections and interest received from marketable debt securities, offset by higher cash paid for employee-related expenses primarily due to higher average headcount.

Previous wording

Cash used in investing activities for the three months ended April 30, 2023, was $713 million, which primarily resulted from a cash outflow of $656 million from the timing of purchases and maturities of marketable securities and capital expenditures of $59 million for data center and office space projects, offset by proceeds of $22 million from sales of marketable securities.

Current wording

Cash used in investing activities for the three months ended July 31, 2023, was $385 million, which primarily resulted from a cash outflow of $345 million from the timing of purchases and maturities of marketable securities and capital expenditures of $65 million for data center and office space projects, offset by proceeds of $25 million from sales of marketable securities.

Previous wording

Cash used in investing activities for the three months ended April 30, 2024, was $258 million, which was primarily related to cash consideration of $512 million for the acquisition of HiredScore, net of cash acquired, and capital expenditures of $81 million for data center and office space projects, offset by proceeds of $335 million from net maturities and sales of marketable debt securities.

Current wording

Cash used in investing activities for the six months ended July 31, 2024, was $603 million, which primarily related to cash consideration of $522 million for the acquisition of HiredScore, net of cash acquired, and capital expenditures of $136 million for data center and office space projects, offset by proceeds of $57 million related to marketable debt securities activity.

Previous wording

Cash used in financing activities was $367 million for the three months ended April 30, 2024, which consisted of taxes paid of $239 million related to net share settlement of equity awards and $128 million of repurchases of common stock under our share repurchase plans.

Current wording

Cash used in financing activities was $347 million for the three months ended July 31, 2024, which was primarily due to repurchases of common stock of $312 million under our February 2024 Share Repurchase Program and taxes paid of $141 million related to net share settlement of equity awards, offset by proceeds of $106 million from the issuance of common stock from employee equity plans.

Previous wording

Free cash flows improved to $291 million for the three months ended April 30, 2024, compared to $218 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections and interest received from marketable debt securities, offset by higher cash paid for employee-related expenses primarily due to higher average headcount and higher capital expenditures for data center and office space projects.

Current wording

Free cash flows were $807 million for the six months ended July 31, 2024, compared to $579 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections and interest received from marketable debt securities, offset by higher cash paid for employee-related expenses primarily due to higher average headcount and higher capital expenditures for data center and office space projects.

Previous wording

In November 2022, our Board of Directors authorized the 2022 Share Repurchase Program under which we were authorized to repurchase up to $500 million of our outstanding shares of Class A common stock. As of April 30, 2024, we had completed the repurchase authorization under this program. In February 2024, our Board of Directors authorized the 2024 Share Repurchase Program, under which we may repurchase up to an additional $500 million of our Class A common stock. For further information, see Note 14, Stockholders’ Equity, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Current wording

In November 2022, our Board of Directors authorized the 2022 Share Repurchase Program under which we were authorized to repurchase up to $500 million of our outstanding shares of Class A common stock. We completed the purchase authorization under this program during the first quarter of fiscal 2025. In February 2024, our Board of Directors authorized the February 2024 Share Repurchase Program, under which we may repurchase up to an additional $500 million of our Class A common stock. In August 2024, our Board of Directors authorized the August 2024 Share Repurchase Program, under which we may repurchase up to an additional $1.0 billion of our outstanding shares of Class A common stock. For further information, see Note 14, Stockholders’ Equity, and Note 20, Subsequent Events, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Previous wording

Effective beginning fiscal 2025, we will exclude certain acquisition-related costs and realignment costs from our non-GAAP results as they may vary from period to period independent of the operating performance of our business. There was no impact to prior period amounts presented in this report as a result of this change since no qualifying costs were incurred in the first quarter of fiscal 2024.

Current wording

Effective beginning fiscal 2025, we will exclude certain acquisition-related costs and realignment costs from our non-GAAP results as they may vary from period to period independent of the operating performance of our business. There was no impact to prior period amounts presented in this report as a result of this change since no qualifying costs were incurred in the first half of fiscal 2024.

Previous wording

See “Results of Operations—Operating Income (Loss) and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income (loss) and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three months ended April 30, 2024, and 2023.

Current wording

See “Results of Operations—Operating Income (Loss) and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income (loss) and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three and six months ended July 31, 2024, and 2023.

Previous wording

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 flows, for the three months ended April 30, 2024, and 2023.

Current wording

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 flows, for the three and six months ended July 31, 2024, and 2023.

Previous wording

For a further discussion of our critical accounting policies, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. During the three months ended April 30, 2024, there were no significant changes to our critical accounting policies and estimates.

Current wording

For a further discussion of our critical accounting policies, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. During the three and six months ended July 31, 2024, there were no significant changes to our critical accounting policies and estimates.