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Debt | 9 Months Ended
--- | ---
Oct. 31, 2024
Debt Disclosure [Abstract] |
Debt | Debt Outstanding debt consisted of the following (in millions):
| October 31, 2024 |  | January 31, 2024
2027 Notes | $ | 1,000 |  |  | $ | 1,000 |
2029 Notes | 750 |  |  | 750 |
2032 Notes | 1,250 |  |  | 1,250 |
Total principal amount | 3,000 |  |  | 3,000 |
Less: unamortized debt discount and issuance costs | (17) |  |  | (20) |
Debt, noncurrent | $ | 2,983 |  |  | $ | 2,980 |
As of October 31, 2024, the future principal payments for the outstanding debt were as follows (in millions):
Fiscal Period: |
Remainder of 2025 | $ | 0 |
2026 | 0 |
2027 | 0 |
2028 | 1,000 |
2029 | 0 |
Thereafter | 2,000 |
Total principal amount | $ | 3,000 |
Senior Notes In April 2022, we issued $3.0 billion aggregate principal amount of senior notes, consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027 (“2027 Notes”), $750 million aggregate principal amount of 3.700% notes due April 1, 2029 (“2029 Notes”), and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year. The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday. We may redeem the Senior Notes in whole or in part at any time or from time to time, at specified redemption dates and prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions. As of October 31, 2024, and January 31, 2024, we were in compliance with all covenants associated with the Senior Notes. We incurred debt discount and issuance costs of approximately $27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes. 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 each arrangement. The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67%, 3.82%, and 3.90%, respectively. As of both October 31, 2024, and January 31, 2024, the total estimated fair value of the Senior Notes was $2.8 billion. The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period. Credit Agreement In April 2022, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. As of October 31, 2024, we had no outstanding revolving loans under the 2022 Credit Agreement. The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid. The revolving loans under the 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000% to 0.500% or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. We are also obligated to pay an ongoing commitment fee on undrawn amounts. The 2022 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 negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions, and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50:1.00, subject to a step-up to 4.50:1.00 at our election for a certain period following an acquisition. As of October 31, 2024, and January 31, 2024, we were in compliance with all covenants included in the 2022 Credit Agreement. Interest Expense on Debt The following table sets forth the interest expense recognized related to our debt (in millions):
| Three Months Ended October 31, |  | Nine Months Ended October 31,
| 2024 |  | 2023 |  | 2024 |  | 2023
Contractual interest expense | $ | 28 |  |  | $ | 28 |  |  | $ | 83 |  |  | $ | 83 |
Interest cost related to amortization of debt discount and issuance costs | 1 |  |  | 1 |  |  | 3 |  |  | 3 |
Total interest expense | $ | 29 |  |  | $ | 29 |  |  | $ | 86 |  |  | $ | 86 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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