Subscription Revenues of $463.6 Million, Up 37% Year Over Year; Total Revenues of $555.4 Million, Up 34% Year Over Year
PLEASANTON, CA–(Marketwired – Nov 29, 2017) – Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal third quarter ended October 31, 2017.
- Total revenues were $555.4 million, an increase of 34.3% from the third quarter of fiscal 2017. Subscription revenues were $463.6 million, an increase of 37.2% from the same period last year.
- Operating loss was $80.1 million, or negative 14.4% of revenues, compared to an operating loss of $105.9 million, or negative 25.6% of revenues, in the same period last year. Non-GAAP operating profit for the third quarter was $50.1 million, or 9.0% of revenues, compared to a non-GAAP operating profit of $8.0 million, or 1.9% of revenues, in the same period last year.1
- Net loss per basic and diluted share was $0.41, compared to a net loss per basic and diluted share of $0.55 in the third quarter of fiscal 2017. Non-GAAP net income per diluted share was $0.24, compared to a non-GAAP net income per diluted share of $0.05 in the same period last year.1
- Operating cash flows for the third quarter were $144.0 million and free cash flows were $107.7 million. For the trailing twelve months, operating cash flows were $448.9 million and free cash flows were $311.2 million.2
- Cash, cash equivalents and marketable securities were $3.2 billion as of October 31, 2017. Unearned revenues were over $1.2 billion, a 21.5% increase from the same period last year.
Comments on the News
“Workday had a great third quarter, driving demand across all product areas and geographies, expanding our value proposition with the delivery of new products, and once again demonstrating our commitment to keeping customer satisfaction among the highest in the industry,” said Aneel Bhusri, co-founder and CEO, Workday. “The outlook for the remainder of fiscal 2018 and beyond is bright as we continue to add new customers for HCM and Financial Management, and unlock new growth drivers such as Workday Prism Analytics and the Workday Cloud Platform.”
“We delivered another strong quarter with subscription revenue up 37%, driven by strong net new customer growth, continued add on sales with existing customers, and high renewal rates,” said Robynne Sisco, chief financial officer, Workday. “As we head into our seasonally strongest quarter, we are raising our fiscal 2018 outlook and are now expecting subscription revenue of $1.780 to $1.782 billion, or growth of 38%. We continue to invest for long-term growth, while delivering consistently solid operating and cash flow margins.”
- Workday held its 11th annual customer conference, Workday Rising, bringing together more than 8,500 members of the Workday community for education and collaboration in Chicago.
- Workday once again achieved its goal to maintain a customer satisfaction rating over 95%, announcing that the company earned a 98% customer satisfaction rating for this year.
- Workday announced the availability of Workday Prism Analytics, which enables customers to bring together any data — including Workday data and data from any outside source — with leading edge analytics tools to make better business decisions.
- Workday also announced the availability of Workday Benchmarking, the first offering delivered on Workday Data-as-a-Service. Workday Benchmarking provides key metrics to customers seeking a better understanding of their company's relative performance in comparison to peers to help achieve optimal performance in their respective markets.
- Workday was positioned by Gartner, Inc. in the Leaders quadrant of “Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises.” Workday was acknowledged as a leader for the second year in a row and achieved the highest overall position for its ability to execute.3
- Workday was also positioned as a leader in “The Forrester Wave™: SaaS Human Resource Management Systems, Q3 2017,” a new report published by Forrester Research, Inc. Workday received the highest score in the strategy category and earned the highest possible scores in 16 criteria, including business vision, usability, and mobile.
Workday plans to host a conference call today to review its third quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed via webcast or through Workday's Investor Relations website. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.
Workday intends to use 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 profit (loss) and non-GAAP net income (loss) per share exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, and debt discount and issuance costs associated with convertible notes. See the section titled “About Non-GAAP Financial Measures” in the accompanying financial tables for further details.
2 Free cash flows are defined as operating cash flows minus capital expenditures (excluding owned real estate projects). See the section titled “About Non-GAAP Financial Measures” in the accompanying financial tables for further details.
3 Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises, 15 August 2017.
Disclaimer – 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, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
Workday is a leading provider of enterprise cloud applications for finance and human resources. Founded in 2005, Workday delivers financial management, human capital management, 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 stock-based compensation expense, which is excluded from our non-GAAP operating margin, requires additional inputs such as number of shares granted and market price that are not ascertainable.
This press release contains forward-looking statements including, among other things, statements regarding Workday's fourth quarter and fiscal year subscription revenue projections, investments, operating margins and cash flow growth. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plans,” 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) breaches in our security measures, unauthorized access to our customers' data or disruptions in our data center operations; (ii) our ability to manage our growth effectively; (iii) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors; (iv) the development of the market for enterprise cloud services; (v) acceptance of our applications and services by customers; (vi) adverse changes in general economic or market conditions; (vii) delays or reductions in information technology spending; and (viii) 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-Q for the quarter ended July 31, 2017 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.
© 2017. 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.
|Condensed Consolidated Balance Sheets|
||October 31, 2017||January 31, 2017
|Cash and cash equivalents||$||1,336,984||$||539,923|
|Trade and other receivables, net||349,309||409,780|
|Prepaid expenses and other current assets||77,036||66,590|
|Total current assets||3,693,772||2,524,445|
|Property and equipment, net||487,234||365,877|
|Deferred costs, noncurrent||120,173||117,249|
|Acquisition-related intangible assets, net||34,305||48,787|
|Liabilities and stockholders' equity|
|Accrued expenses and other current liabilities||108,074||61,582|
|Current portion of convertible senior notes, net||336,936||—|
|Total current liabilities||1,749,546||1,285,243|
|Convertible senior notes, net||1,136,494||534,423|
|Unearned revenue, noncurrent||100,135||135,331|
|Additional paid-in capital||3,195,130||2,681,200|
|Accumulated other comprehensive income (loss)||(16,310||)||2,071|
|Total stockholders' equity||1,540,274||1,276,608|
|Total liabilities and stockholders' equity||$||4,564,716||$||3,268,282|
|* Prior-period information has been restated for the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on February 1, 2017.|
|Condensed Consolidated Statements of Operations|
|(in thousands, except per share data)|
|Three Months Ended October 31,||Nine Months Ended October 31,|
|Costs and expenses(1):|
|Costs of subscription services||71,898||54,645||197,627||155,224|
|Costs of professional services||91,657||72,240||260,834||198,140|
|Sales and marketing||176,121||149,537||503,782||412,055|
|General and administrative||56,184||57,721||163,085||144,609|
|Total costs and expenses||635,448||519,454||1,782,458||1,399,003|
|Other income (expense), net||(3,742||)||(3,105||)||(4,467||)||(30,136||)|
|Loss before provision for (benefit from) income taxes||(83,801||)||(109,037||)||(226,355||)||(294,283||)|
|Provision for (benefit from) income taxes||1,745||1,077||5,767||2,147|
|Net loss per share, basic and diluted||$||(0.41||)||$||(0.55||)||$||(1.12||)||$||(1.50||)|
|Weighted-average shares used to compute net loss per share, basic and diluted||209,188||199,479||206,715||197,093|
|(1) Costs and expenses include share-based compensation expenses as follows:|
|Costs of subscription services||$||6,899||$||5,472||$||19,170||$||14,837|
|Costs of professional services||9,956||7,436||27,278||18,698|
|Sales and marketing||25,517||22,597||74,618||62,443|
|General and administrative||20,991||24,982||63,656||59,684|
|*Prior-period information has been restated for the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on February 1, 2017.|
|Condensed Consolidated Statements of Cash Flows|
||Three Months Ended October 31,||Nine Months Ended October 31,|
|Cash flows from operating activities|
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:|
|Depreciation and amortization||34,982||30,453||102,380||83,239|
|Share-based compensation expenses||122,479||100,098||351,790||266,555|
|Amortization of deferred costs||14,519||11,561||42,165||32,917|
|Amortization of debt discount and issuance costs||12,257||6,782||25,992||20,071|
|Gain on sale of cost method investment||(194||)||—||(720||)||(65||)|
|Impairment of cost method investment||100||—||100||15,000|
|Changes in operating assets and liabilities, net of business combinations:|
|Trade and other receivables, net||19,070||(20,693||)||59,463||25,289|
|Prepaid expenses and other assets||(11,355||)||(3,686||)||(23,373||)||(11,368||)|
|Accrued expenses and other liabilities||59,171||30,591||49,788||29,619|
|Net cash provided by (used in) operating activities||144,031||71,556||339,179||240,895|
|Cash flows from investing activities|
|Purchases of marketable securities||(930,783||)||(380,620||)||(1,829,231||)||(1,571,756||)|
|Maturities of marketable securities||372,389||449,592||1,185,730||1,614,495|
|Sales of available-for-sale securities||32,886||63,340||222,823||92,192|
|Business combinations, net of cash acquired||—||(144,209||)||—||(147,879||)|
|Owned real estate projects||(27,616||)||(59,705||)||(80,151||)||(85,479||)|
|Capital expenditures, excluding owned real estate projects||(36,356||)||(27,518||)||(105,477||)||(88,535||)|
|Purchases of cost method investments||(5,272||)||—||(10,722||)||(300||)|
|Sale and maturities of cost method investments||294||—||1,026||315|
|Net cash provided by (used in) investing activities||(595,458||)||(99,120||)||(617,002||)||(187,243||)|
|Cash flows from financing activities|
|Proceeds from borrowings on convertible senior notes, net of issuance costs||1,132,101||—||1,132,101||—|
|Proceeds from issuance of warrants||80,805||—||80,805||—|
|Purchase of convertible senior notes hedges||(175,530||)||—||(175,530||)||—|
|Proceeds from issuance of common stock from employee equity plans||1,974||4,491||36,501||33,267|
|Net cash provided by (used in) financing activities||1,039,314||4,926||1,073,765|
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