Press Release

Workday Announces Fiscal 2020 First Quarter Financial Results

First Quarter Total Revenues of $825.1 Million, Up 33.4% Year Over Year 
Subscription Revenue of $701.0 Million, Up 34.3% Year Over Year 
Subscription Revenue Backlog of $6.80 Billion, Up 30.0% Year Over Year

PLEASANTON, Calif., May 28, 2019 (GLOBE NEWSWIRE) --  Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2020 first quarter ended April 30, 2019.

Fiscal First Quarter Results

  • Total revenues were $825.1 million, an increase of 33.4% from the first quarter of fiscal year 2019. Subscription revenue was $701.0 million, an increase of 34.3% from the same period last year.
     
  • Operating loss was $123.4 million, or negative 15.0% of revenues, compared to an operating loss of $71.3 million, or negative 11.5% of revenues, in the same period last year. Non-GAAP operating income for the first quarter was $107.7 million, or 13.1% of revenues, compared to a non-GAAP operating income of $80.8 million, or 13.1% of revenues, in the same period last year.1
     
  • Net loss per basic and diluted share was $0.52, compared to a net loss per basic and diluted share of $0.35 in the first quarter of fiscal 2019. Non-GAAP net income per diluted share was $0.43 compared to a non-GAAP net income per diluted share of $0.33 in the same period last year.2
     
  • Operating cash flows were $209.2 million.
     
  • Cash, cash equivalents, and marketable securities were $1.89 billion as of April 30, 2019. Unearned revenues were $1.83 billion, a 29.3% increase from the same period last year.

Comments on the News

“Coming off the heels of an excellent fiscal year 2019, our momentum continued with a strong first quarter. We added many new customers across the globe – increasing our footprint across the Fortune 50 and 500 – and saw more existing customers expand their investment in Workday,” said Aneel Bhusri, co-founder and CEO, Workday. “Looking ahead, we believe our ability to enable more organizations to plan, execute, and analyze in one system powered by machine learning, coupled with our commitment to employee and customer success, will further solidify our foundation for enduring growth.”

“Our fiscal year 2020 got off to a great start as we delivered strong top-line growth and record non-GAAP operating profit,” said Robynne Sisco, co-president and chief financial officer, Workday. “Based on our strong first quarter results, we are raising our fiscal year 2020 outlook for subscription revenue to $3.045 to $3.060 billion, or growth of 28%. We expect our second quarter subscription revenue to be $746 to $748 million, or growth of approximately 32%. Our focus remains centered on driving strong, durable growth as we continue to invest in the business to support our long-term aspirations.”

Recent Highlights

  • Workday welcomed Ann-Marie Campbell to its Board of Directors in April 2019. Ann-Marie currently serves as executive vice president of U.S. Stores for The Home Depot.
  • Workday was positioned by Gartner, Inc. in the Leaders quadrant of the Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large, and Global Enterprises. Workday was acknowledged as a Leader for the third year in a row.3
     
  • As part of its latest feature release, Workday 32, Workday delivered more than 500 new features, including deeper investments in Workday Learning and Workday Recruiting, finance-focused machine learning capabilities to help resource managers align skills resources to projects, and even deeper integration between Workday and Adaptive Insights.
     
  • Workday, along with 10 leading federal government agencies and large corporations from the technology and financial services industries, launched The Cybersecurity Talent Initiative. The first-of-its-kind, public-private partnership is focused on developing the next generation of motivated, mission-driven technologists to ensure a world-class cybersecurity workforce for the future.
     
  • Workday was ranked #1 on San Francisco Business Times’ Best Places to Work in the Bay Area list. This is the seventh time Workday has been ranked #1 on the list. Workday also ranked #1 on the UK’s Best Large Workplaces list by Great Place to Work Institute.

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2020 first quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/ 4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

Workday uses the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

1 Non-GAAP operating income excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization expense for acquisition-related intangible assets. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

2 Non-GAAP net income per share excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, non-cash interest expense related to our convertible senior notes, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

3 Gartner, Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises, John Van Decker, Robert Anderson, and Greg Leiter, 13 May 2019. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

About Workday

Workday is a leading provider of enterprise cloud applications for finance and human resources. Founded in 2005, Workday delivers financial management, human capital management, planning, and analytics applications designed for the world’s largest companies, educational institutions, and government agencies. Organizations ranging from medium-sized businesses to Fortune 50 enterprises have selected Workday.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to Workday's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.” A reconciliation of our forward outlook for non-GAAP operating margin with our forward-looking GAAP operating margin is not available without unreasonable efforts as the quantification of share-based compensation expense, which is excluded from our non-GAAP operating margin, requires additional inputs such as the number of shares granted and market prices that are not ascertainable.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding Workday's ability to enable more organizations to plan, execute, and analyze in one system powered by machine learning, ability to solidify its foundation for enduring growth, employee and customer success, subscription revenue projections and growth, products, and investments in its business. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plans,” “project,” “looking ahead,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) risks related to our ability to successfully integrate Adaptive Insights’ operations or failure to achieve the expected benefits of this or any other acquisition or transaction; (ii) our ability to implement our plans, objectives, and other expectations with respect to the Adaptive Insights business or that of any other acquired company; (iii) breaches in our security measures, unauthorized access to our customers' data or disruptions in our data center operations; (iv) our ability to manage our growth effectively; (v) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, and marketing initiatives by our competitors; (vi) the development of the market for enterprise cloud applications and services; (vii) acceptance of our applications and services by customers; (viii) adverse changes in general economic or market conditions; (ix) the regulatory, economic, and political risks associated with our international operations; (x) delays or reductions in information technology spending; and (xi) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on risks that could affect Workday's results is included in our filings with the Securities and Exchange Commission (SEC), including our Form 10-K for the fiscal year ended January 31, 2019 and our future reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. Workday assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

Any unreleased services, features, or functions referenced in this document, our website, or other press releases or public statements that are not currently available are subject to change at Workday's discretion and may not be delivered as planned or at all. Customers who purchase Workday services should make their purchase decisions based upon services, features, and functions that are currently available.

© 2019. Workday, Inc. All rights reserved. Workday and the Workday logo are registered trademarks of Workday, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders.


Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 April 30, 2019 January 31, 2019
Assets   
Current assets:   
Cash and cash equivalents$781,772  $638,554 
Marketable securities1,110,141  1,139,864 
Trade and other receivables, net542,843  704,680 
Deferred costs82,316  80,809 
Prepaid expenses and other current assets148,062  136,689 
Total current assets2,665,134  2,700,596 
Property and equipment, net885,789  796,907 
Operating lease right-of-use assets280,145   
Deferred costs, noncurrent179,616  183,518 
Acquisition-related intangible assets, net293,897  313,240 
Goodwill1,379,125  1,379,125 
Other assets140,468  147,360 
Total assets$5,824,174  $5,520,746 
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$35,146  $29,093 
Accrued expenses and other current liabilities129,182  123,542 
Accrued compensation244,794  207,924 
Unearned revenue1,734,442  1,837,618 
Operating lease liabilities64,107   
Current portion of convertible senior notes, net235,408  232,514 
Total current liabilities2,443,079  2,430,691 
Convertible senior notes, net983,507  972,264 
Unearned revenue, noncurrent95,708  111,652 
Operating lease liabilities, noncurrent246,037   
Other liabilities11,095  47,697 
Total liabilities3,779,426  3,562,304 
Stockholders’ equity:   
Common stock225  221 
Additional paid-in capital4,294,370  4,105,334 
Accumulated other comprehensive income (loss)13,113  (809)
Accumulated deficit(2,262,960) (2,146,304)
Total stockholders’ equity2,044,748  1,958,442 
Total liabilities and stockholders’ equity$5,824,174  $5,520,746 
        


Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

 Three Months Ended April 30,
 2019 2018
Revenues:   
Subscription services$701,024  $522,149 
Professional services124,031  96,494 
Total revenues825,055  618,643 
Costs and expenses (1):   
Costs of subscription services112,469  80,245 
Costs of professional services130,750  97,726 
Product development347,831  263,584 
Sales and marketing272,936  192,771 
General and administrative84,455  55,581 
Total costs and expenses948,441  689,907 
Operating loss(123,386) (71,264)
Other income (expense), net7,141  (3,848)
Loss before provision for (benefit from) income taxes(116,245) (75,112)
Provision for (benefit from) income taxes30  (702)
Net loss$(116,275) $(74,410)
Net loss per share, basic and diluted$(0.52) $(0.35)
Weighted-average shares used to compute net loss per share, basic and diluted223,309  213,055 


(1) Costs and expenses include share-based compensation expenses as follows:       
Costs of subscription services$10,415  $7,877 
Costs of professional services16,150  10,792 
Product development91,237  68,511 
Sales and marketing38,854  25,612 
General and administrative28,579  19,867 
      


Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 Three Months Ended April 30,
 2019 2018
Cash flows from operating activities   
Net loss$(116,275) $(74,410)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Depreciation and amortization61,165  38,664 
Share-based compensation expenses185,235  132,659 
Amortization of deferred costs20,880  16,360 
Amortization of debt discount and issuance costs11,587  18,139 
Other8,976  (9,289)
Changes in operating assets and liabilities:   
Trade and other receivables, net157,379  168,702 
Deferred costs(18,485) (12,606)
Prepaid expenses and other assets(5,107) 8,488 
Accounts payable1,503  7,954 
Accrued expenses and other liabilities21,403  11,627 
Unearned revenue(119,098) (122,055)
Net cash provided by (used in) operating activities209,163  184,233 
Cash flows from investing activities   
Purchases of marketable securities(471,054) (908,126)
Maturities of marketable securities460,097  686,676 
Sales of marketable securities50,948  27,359 
Owned real estate projects(39,634) (39,233)
Capital expenditures, excluding owned real estate projects(65,535) (48,862)
Purchases of non-marketable equity and other investments(2,200) (2,400)
Other23   
Net cash provided by (used in) investing activities(67,355) (284,586)
Cash flows from financing activities   
Proceeds from issuance of common stock from employee equity plans3,455  2,611 
Other(93) (57)
Net cash provided by (used in) financing activities3,362  2,554 
Effect of exchange rate changes(327) (420)
Net increase (decrease) in cash, cash equivalents, and restricted cash144,843  (98,219)
Cash, cash equivalents, and restricted cash at the beginning of period642,203  1,135,654 
Cash, cash equivalents, and restricted cash at the end of period$787,046  $1,037,435 
        


Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended April 30, 2019
(in thousands, except percentages and per share data)
(unaudited)

 GAAP Share-Based
Compensation
Expenses
 Other
Operating
Expenses (2)
 Amortization
of Debt
Discount and
Issuance
Costs
 Income Tax
Effects (3)
 Non-GAAP
Costs and expenses:           
Costs of subscription services$112,469  $(10,415) $(12,660) $  $  $89,394 
Costs of professional services130,750  (16,150) (3,459)     111,141 
Product development347,831  (91,237) (13,631)     242,963 
Sales and marketing272,936  (38,854) (12,834)     221,248 
General and administrative84,455  (28,579) (3,298)     52,578 
Operating income (loss)(123,386) 185,235  45,882      107,731 
Operating margin(15.0)% 22.5% 5.6% % % 13.1%
Other income (expense), net7,141      11,587    18,728 
Income (loss) before provision for (benefit from) income taxes(116,245) 185,235  45,882  11,587    126,459 
Provision for (benefit from) income taxes30        21,468  21,498 
Net income (loss)$(116,275) $185,235  $45,882  $11,587  $(21,468) $104,961 
Net income (loss) per share (1)$(0.52) $0.83  $0.21  $0.05  $(0.14) $0.43 


(1) GAAP net loss per share is calculated based upon 223,309 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 245,333 diluted weighted-average shares of common stock.
(2) Other operating expenses include total employer payroll tax-related items on employee stock transactions of $26.5 million and amortization of acquisition-related intangible assets of $19.3 million.
(3)  We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2020, the projected non-GAAP tax rate is 17%.


Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended April 30, 2018
(in thousands, except percentages and per share data)
(unaudited)

 GAAP Share-Based
Compensation
Expenses
 Other
Operating
Expenses (2)
 Amortization
of Debt
Discount and
Issuance
Costs
 Income Tax
Effects (3)
 Non-GAAP
Costs and expenses:           
Costs of subscription services$80,245  $(7,877) $(4,452) $  $  $67,916 
Costs of professional services97,726  (10,792) (1,701)     85,233 
Product development263,584  (68,511) (8,797)     186,276 
Sales and marketing192,771  (25,612) (2,580)     164,579 
General and administrative55,581  (19,867) (1,867)     33,847 
Operating income (loss)(71,264) 132,659  19,397      80,792 
Operating margin(11.5)% 21.4% 3.2% % % 13.1%
Other income (expense), net(3,848)     18,139    14,291 
Income (loss) before provision for (benefit from) income taxes(75,112) 132,659  19,397  18,139    95,083 
Provision for (benefit from) income taxes(702)       16,866  16,164 
Net income (loss)$(74,410) $132,659  $19,397  $18,139  $(16,866) $78,919 
Net income (loss) per share (1)$(0.35) $0.62  $0.09  $0.09  $(0.12) $0.33 


(1) GAAP net loss per share is calculated based upon 213,055 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 236,027 diluted weighted-average shares of common stock.
(2) Other operating expenses include total employer payroll tax-related items on employee stock transactions of $14.3 million and amortization of acquisition-related intangible assets of $5.1 million.
(3) We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2019, the projected non-GAAP tax rate is 17%.
   

About Non-GAAP Financial Measures

To provide investors and others with additional information regarding Workday’s results, we have disclosed the following non-GAAP financial measures: non-GAAP operating income (loss) and non-GAAP net income (loss) per share. Workday has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Non-GAAP operating income (loss) differs from GAAP in that it excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization of acquisition-related intangible assets. Non-GAAP net income (loss) per share differs from GAAP in that it excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization of acquisition-related intangible assets, non-cash interest expense related to our convertible senior notes, and income tax effects.

Workday’s management uses these non-GAAP financial measures 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 Workday’s financial performance. Management believes these non-GAAP financial measures reflect Workday’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in Workday’s business as they exclude expenses that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Workday’s operating results and prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

Management believes excluding the following items from the GAAP Condensed Consolidated Statements of Operations is useful to investors and others in assessing Workday’s operating performance due to the following factors:

  • 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 to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. Share-based compensation expenses are determined using a number of factors, including our stock price, 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 are not reflective of the value ultimately received by the grant recipients.

  • Other operating expenses. Other operating expenses includes 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 ongoing operations.

  • Amortization of debt discount and issuance costs. Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the convertible senior notes that were issued in private placements in June 2013 and September 2017. Accordingly, for GAAP purposes we are required to recognize the effective interest expense on our convertible senior notes and amortize the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are excluded from management’s assessment of our operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of Workday’s operational performance.

  • Income tax effects. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of share-based compensation and related employer payroll taxes, amortization of acquisition-related intangible assets, and amortization of debt discount and issuance costs. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. For fiscal 2020 and 2019, we have determined the projected non-GAAP tax rate to be 17%. We will periodically re-evaluate this tax rate, as necessary, for significant events, based on our ongoing analysis of the 2017 U.S. Tax Cuts and Jobs Act, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

The use of non-GAAP operating income (loss) and non-GAAP net income (loss) per share measures have certain limitations as they do not reflect all items of income and expense that affect Workday’s operations. Workday compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial 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. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review Workday’s financial information in its entirety and not rely on a single financial measure.

Investor Relations Contact:
Michael Magaro
+1 (925) 379-6000
Michael.Magaro@Workday.com 

Media Contact:
Nina Oestlien
+1 (415) 828-3034
Nina.Oestlien@Workday.com 

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