Workday(WDAY) - 2025 Q3 - Quarterly Report

Financial Performance - Total revenues for the three months ended October 31, 2024, were $2.16 billion, a 16$1.87 billion in the prior year period[107]. - Subscription services revenues for the same period were $1.96 billion, reflecting a 16$1.69 billion year-over-year[113]. - GAAP operating income increased by 88% to $165 million for the three months ended October 31, 2024, compared to$88 million in the prior year[107]. - Non-GAAP operating income for the three months ended October 31, 2024, was $569 million, a 23$462 million in the prior year[107]. - Professional services revenues for the three months ended October 31, 2024, were $201 million, a 15$175 million in the prior year[113]. - GAAP operating income was $165 million, or 7.6$88 million, or 4.7% of revenues for the prior year[128]. - Non-GAAP operating income was $569 million, or 26.3$462 million, or 24.8% of revenues for the prior year[128]. Revenue Backlog and Retention - The gross revenue retention rate was 98% as of October 31, 2024, indicating strong customer satisfaction and retention[114]. - Total subscription revenue backlog reached $22.19 billion as of October 31, 2024, up 20$18.45 billion a year earlier[115]. Cash and Liquidity - Cash, cash equivalents, and marketable securities totaled $7.16 billion as of October 31, 2024, a 4$6.88 billion a year earlier[107]. - As of October 31, 2024, the company's liquidity sources included cash, cash equivalents, and marketable securities totaling $7.2 billion, primarily for working capital and corporate purposes[133]. - Cash provided by operating activities for the three months ended October 31, 2024, was$406 million, a decrease from $451 million in the same period of 2023, attributed to increased employee-related payments of$119 million and supplier payments of $62 million[134]. - For the nine months ended October 31, 2024, cash provided by operating activities improved to$1.3 billion from $1.2 billion in 2023, driven by higher cash collections of$555 million due to increased sales[136]. - As of October 31, 2024, the company had cash, cash equivalents, and marketable securities totaling $7.2 billion, down from$7.8 billion as of January 31, 2024[158]. Expenses and Costs - Total costs and expenses were $2.0 billion for the three months ended October 31, 2024, an increase of$217 million, or 12% from the prior year[117]. - Costs of subscription services were $329 million for the three months ended October 31, 2024, an increase of$66 million, or 25% from the prior year[118]. - Costs of professional services were $201 million for the three months ended October 31, 2024, an increase of$19 million, or 11% from the prior year[119]. - Product development expenses were $647 million for the three months ended October 31, 2024, an increase of$28 million, or 5% from the prior year[120]. - Sales and marketing expenses were $620 million for the three months ended October 31, 2024, an increase of$82 million, or 15% from the prior year[123]. - General and administrative expenses were $198 million for the three months ended October 31, 2024, an increase of$22 million, or 12% from the prior year[124]. Employee and Headcount - The company added 2,124 employees, bringing total headcount to 20,493, a 12% increase year-over-year[107]. Cash Flow Activities - Cash used in investing activities for the three months ended October 31, 2024, was $450 million, primarily due to the acquisition of Evisort for$302 million and capital expenditures of $47 million[137]. - Free cash flows for the three months ended October 31, 2024, were$359 million, down from $391 million in the prior year, mainly due to increased employee-related payments[140]. - Cash used in financing activities for the three months ended October 31, 2024, was$282 million, primarily for share repurchases of $158 million and taxes paid of$124 million related to equity awards[138]. - For the nine months ended October 31, 2024, cash used in financing activities totaled $996 million, mainly due to share repurchases of$597 million[138]. Capital Expenditures and Financing - The company expects capital expenditures to be approximately $300 million in fiscal 2025, focusing on data centers and office facilities[137]. - The company authorized a new share repurchase program in August 2024, allowing for the repurchase of up to$1.0 billion of Class A common stock[143]. - The company may seek additional debt or equity financing as part of its long-term capital strategy, influenced by macroeconomic trends and growth initiatives[133]. Market and Economic Risks - An immediate increase or decrease of 100 basis points in interest rates would have resulted in an approximately $58 million market value reduction or increase in the investment portfolio as of October 31, 2024[158]. - The company is exposed to foreign currency exchange risk due to global transactions, with significant exposures to the euro, British pound, Canadian dollar, and Australian dollar as of October 31, 2024[157]. - The Senior Notes have fixed annual interest rates, eliminating economic interest rate exposure on these debt obligations, but their fair values are still subject to interest rate risk[159]. - Borrowings under the 2022 Credit Agreement bear interest at a variable rate, exposing the company to market risk from changes in underlying index rates[159]. - The company enters into foreign currency derivative hedging transactions to mitigate risks associated with foreign currency exchange fluctuations[157]. - The investment portfolio is managed to preserve capital and meet liquidity needs, with no investments made for trading or speculative purposes[158]. - Fixed rate securities may experience adverse market value effects due to rising interest rates, while floating rate securities may yield less income if interest rates fall[158]. - The company recognizes declines in fair value of debt securities classified as "available-for-sale" on the Condensed Consolidated Statements of Operations if the decline is attributable to credit losses expected to be nonrecoverable[158]. - Recent macroeconomic events have negatively impacted global economies and financial markets, increasing foreign currency exchange risk and interest rate risk for the company[156].