Workday Announces Fiscal 2020 Second Quarter Financial Results

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Second Quarter Total Revenues of $887.8 Million, Up 32.2% Year Over Year 
 
Subscription Revenue of $757.2 Million, Up 33.9% Year Over Year 
 
Subscription Revenue Backlog of $7.03 Billion, Up 27.2% Year Over Year
 

SINGAPORE – Media OutReach – 5 September 2019 – Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2020 second quarter ended July 31, 2019.

 

Fiscal 2020 Second Quarter Results

  • Total revenues were $887.8 million, an increase of 32.2% from the second quarter of fiscal 2019. Subscription revenue was $757.2 million, an increase of 33.9% from the same period last year.
  • Operating loss was $122.5 million, or negative 13.8% of revenues, compared to an operating loss of $89.0 million, or negative 13.2% of revenues, in the same period last year. Non-GAAP operating income for the second quarter was $117.5 million, or 13.2% of revenues, compared to a non-GAAP operating income of $68.1 million, or 10.1% of revenues, in the same period last year.1
  • Net loss per basic and diluted share was $0.53, compared to a net loss per basic and diluted share of $0.40 in the second quarter of fiscal 2019. Non-GAAP net income per diluted share was $0.44 compared to a non-GAAP net income per diluted share of $0.31 in the same period last year.2
  • Operating cash flows were $100.3 million compared to $57.6 million in the same period last year.
  • Cash, cash equivalents, and marketable securities were $1.93 billion as of July 31, 2019. Unearned revenues were $1.89 billion, a 27.1% increase from the same period last year.

Comments on the News

“It was a strong quarter, with continued global customer momentum across the Fortune 500 and Global 2,000, as more organizations look to Workday for the ability to plan, execute, and analyze in one system powered by machine learning. In addition, we celebrated one year with Adaptive Insights and continue to make great progress on our integration vision,” said Aneel Bhusri, co-founder and CEO, Workday. “As we move into the second half of the year, we are continuing to invest in areas that leverage our strengths and open new opportunities.”

“We delivered strong Q2 results with subscription revenue up 34%, along with solid operating margins and cash flow,” said Robynne Sisco, co-president and chief financial officer, Workday. “Based on our second quarter results, we are raising our fiscal 2020 subscription revenue outlook and now expect subscription revenue of $3.06 to $3.07 billion. We expect our third quarter subscription revenue to be between $783 and $785 million. We continue to prioritize investing in long-term growth initiatives, while delivering solid operating margins and cash flow over time.”

 

Recent Highlights

  • Workday opened its new headquarters in Pleasanton, Calif. The new 410,000-square-foot, six-story building was designed to encourage collaboration and will accommodate 2,200 employees as well as Workday’s new customer center.
  • Workday celebrated the one-year anniversary of its acquisition of Adaptive Insights. In the last year, the two organizations have seen continued business planning momentum, including the addition of more than 800 new Adaptive Insights customers, machine learning advancements, the completion of the first phase of the Adaptive Insights integration with Workday as part of the Power of One, and record attendance at Adaptive Live, the company’s annual customer conference.
  • Workday published its commitments to ethical artificial intelligence (AI), which includes six principles that guide how it develops machine learning — a subset of AI — for the enterprise responsibly.
  • Fast Company recognized Workday on its inaugural list of the 50 Best Workplaces For Innovators, which honors organizations that demonstrate a deep commitment to encouraging innovation at all levels.
  • Workday became the first organization to adhere to the EU Cloud Code of Conduct (CoC) by SCOPE Europe, underscoring the company’s continued commitment to global data protection.
  • Workday appointed Carolyn Horne as president of the EMEA region and David Webster as president of the APJ region. In addition, Workday promoted Josh DeFigueiredo to chief security officer.
  • Workday released its 2019 Global Impact Report, which provides an inside look into the company’s efforts to make a positive impact on the world — from implementing sustainable practices, to creating a better place to work, and empowering positive social impact.

Additional Information

 

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

July 31, 2019

January 31, 2019

Assets

Current assets:

Cash and cash equivalents

$

619,514

$

638,554

Marketable securities

1,307,006

1,139,864

Trade and other receivables, net

613,425

704,680

Deferred costs

85,557

80,809

Prepaid expenses and other current assets

163,530

136,689

Total current assets

2,789,032

2,700,596

Property and equipment, net

919,523

796,907

Operating lease right-of-use assets

294,824

Deferred costs, noncurrent

182,580

183,518

Acquisition-related intangible assets, net

277,953

313,240

Goodwill

1,389,349

1,379,125

Other assets

138,895

147,360

Total assets

$

5,992,156

$

5,520,746

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

32,540

$

29,093

Accrued expenses and other current liabilities

114,494

123,542

Accrued compensation

192,064

207,924

Unearned revenue

1,796,423

1,837,618

Operating lease liabilities

65,554

Current portion of convertible senior notes, net

1,233,189

232,514

Total current liabilities

3,434,264

2,430,691

Convertible senior notes, net

972,264

Unearned revenue, noncurrent

89,219

111,652

Operating lease liabilities, noncurrent

243,863

Other liabilities

14,525

47,697

Total liabilities

3,781,871

3,562,304

Stockholders’ equity:

Common stock

227

221

Additional paid-in capital

4,561,272

4,105,334

Accumulated other comprehensive income (loss)

32,458

(809

)

Accumulated deficit

(2,383,672

)

(2,146,304

)

Total stockholders’ equity

2,210,285

1,958,442

Total liabilities and stockholders’ equity

$

5,992,156

$

5,520,746

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

Three Months Ended July 31,

Six Months Ended July 31,

2019

2018

2019

2018

Revenues:

Subscription services

$

757,155

$

565,659

$

1,458,179

$

1,087,808

Professional services

130,597

106,061

254,628

202,555

Total revenues

887,752

671,720

1,712,807

1,290,363

Costs and expenses (1):

Costs of subscription services

121,161

87,523

233,630

167,768

Costs of professional services

145,173

112,707

275,923

210,433

Product development

378,122

292,840

725,953

556,424

Sales and marketing

280,200

202,464

553,136

395,235

General and administrative

85,593

65,168

170,048

120,749

Total costs and expenses

1,010,249

760,702

1,958,690

1,450,609

Operating loss

(122,497

)

(88,982

)

(245,883

)

(160,246

)

Other income (expense), net

(106

)

1,613

7,035

(2,235

)

Loss before provision for (benefit from) income taxes

(122,603

)

(87,369

)

(238,848

)

(162,481

)

Provision for (benefit from) income taxes

(1,891

)

(1,213

)

(1,861

)

(1,915

)

Net loss

$

(120,712

)

$

(86,156

)

$

(236,987

)

$

(160,566

)

Net loss per share, basic and diluted

$

(0.53

)

$

(0.40

)

$

(1.05

)

$

(0.75

)

Weighted-average shares used to compute net loss per share, basic and diluted

226,392

215,932

224,857

214,517

(1)

Costs and expenses include share-based compensation expenses as follows:

Costs of subscription services

$

12,001

$

8,521

$

22,416

$

16,398

Costs of professional services

18,991

12,518

35,141

23,310

Product development

105,758

75,354

196,995

143,865

Sales and marketing

42,690

29,367

81,544

54,979

General and administrative

29,781

21,303

58,360

41,170


Workday, Inc.

Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2019

2018

2019

2018

Cash flows from operating activities

Net loss

$

(120,712

)

$

(86,156

)

$

(236,987

)

$

(160,566

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

67,754

42,226

128,919

80,890

Share-based compensation expenses

208,912

147,063

394,147

279,722

Amortization of deferred costs

22,002

17,061

42,882

33,421

Amortization of debt discount and issuance costs

14,301

17,490

25,888

35,629

Other

11,401

(4,894

)

20,377

(14,183

)

Changes in operating assets and liabilities, net of business combinations:

Trade and other receivables, net

(73,437

)

(104,758

)

83,942

63,944

Deferred costs

(28,207

)

(23,943

)

(46,692

)

(36,549

)

Prepaid expenses and other assets

(1,679

)

(5,446

)

(6,786

)

3,042

Accounts payable

1,047

5,987

2,550

13,941

Accrued expenses and other liabilities

(56,524

)

(15,182

)

(35,121

)

(3,555

)

Unearned revenue

55,461

68,168

(63,637

)

(53,887

)

Net cash provided by (used in) operating activities

100,319

57,616

309,482

241,849

Cash flows from investing activities

Purchases of marketable securities

(582,848

)

(526,216

)

(1,053,902

)

(1,434,342

)

Maturities of marketable securities

385,710

655,205

845,807

1,341,881

Sales of marketable securities

4,551

914,938

55,499

942,297

Owned real estate projects

(34,149

)

(49,537

)

(73,783

)

(88,770

)

Capital expenditures, excluding owned real estate projects

(75,576

)

(53,346

)

(141,111

)

(102,208

)

Business combinations, net of cash acquired

(12,885

)

(26,737

)

(12,885

)

(26,737

)

Purchase of other intangible assets

(1,000

)

(1,000

)

Purchases of non-marketable equity and other investments

(5,516

)

(1,000

)

(7,716

)

(3,400

)

Other

(32

)

(9

)

Net cash provided by (used in) investing activities

(320,745

)

912,307

(388,100

)

627,721

Cash flows from financing activities

Payments on convertible senior notes

(27

)

(350,005

)

(27

)

(350,005

)

Proceeds from issuance of common stock from employee equity plans

58,085

38,686

61,540

41,297

Other

(107

)

(59

)

(200

)

(116

)

Net cash provided by (used in) financing activities

57,951

(311,378

)

61,313

(308,824

)

Effect of exchange rate changes

75

(162

)

(252

)

(582

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

(162,400

)

658,383

(17,557

)

560,164

Cash, cash equivalents, and restricted cash at the beginning of period

787,046

1,037,435

642,203

1,135,654

Cash, cash equivalents, and restricted cash at the end of period

$

624,646

$

1,695,818

$

624,646

$

1,695,818

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended July 31, 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

$

121,161

$

(12,001

)

$

(11,739

)

$

$

$

97,421

Costs of professional services

145,173

(18,991

)

(1,233

)

124,949

Product development

378,122

(105,758

)

(5,380

)

266,984

Sales and marketing

280,200

(42,690

)

(10,449

)

227,061

General and administrative

85,593

(29,781

)

(2,021

)

53,791

Operating income (loss)

(122,497

)

209,221

30,822

117,546

Operating margin

(13.8

)%

23.6

%

3.4

%

%

%

13.2

%

Other income (expense), net

(106

)

14,301

14,195

Income (loss) before provision for (benefit from) income taxes

(122,603

)

209,221

30,822

14,301

131,741

Provision for (benefit from) income taxes

(1,891

)

24,287

22,396

Net income (loss)

$

(120,712

)

$

209,221

$

30,822

$

14,301

$

(24,287

)

$

109,345

Net income (loss) per share (1)

$

(0.53

)

$

0.92

$

0.14

$

0.06

$

(0.15

)

$

0.44

(1)

GAAP net loss per share is calculated based upon 226,392 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 247,748 diluted weighted-average shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $19.5 million and total employer payroll tax-related items on employee stock transactions of $11.3 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 July 31, 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

$

87,523

$

(8,521

)

$

(3,787

)

$

$

$

75,215

Costs of professional services

112,707

(12,518

)

(519

)

99,670

Product development

292,840

(75,354

)

(3,960

)

213,526

Sales and marketing

202,464

(29,367

)

(1,039

)

172,058

General and administrative

65,168

(21,303

)

(731

)

43,134

Operating income (loss)

(88,982

)

147,063

10,036

68,117

Operating margin

(13.2

)%

21.9

%

1.4

%

%

%

10.1

%

Other income (expense), net

1,613

17,490

19,103

Income (loss) before provision for (benefit from) income taxes

(87,369

)

147,063

10,036

17,490

87,220

Provision for (benefit from) income taxes

(1,213

)

16,004

14,791

Net income (loss)

$

(86,156

)

$

147,063

$

10,036

$

17,490

$

(16,004

)

$

72,429

Net income (loss) per share (1)

$

(0.40

)

$

0.68

$

0.05

$

0.08

$

(0.10

)

$

0.31

(1)

GAAP net loss per share is calculated based upon 215,932 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 237,404 diluted weighted-average shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $5.3 million and total employer payroll tax-related items on employee stock transactions of $4.7 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 was 17%.

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Six Months Ended July 31, 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

$

233,630

$

(22,416

)

$

(24,399

)

$

$

$

186,815

Costs of professional services

275,923

(35,141

)

(4,692

)

236,090

Product development

725,953

(196,995

)

(19,011

)

509,947

Sales and marketing

553,136

(81,544

)

(23,283

)

448,309

General and administrative

170,048

(58,360

)

(5,319

)

106,369

Operating income (loss)

(245,883

)

394,456

76,704

225,277

Operating margin

(14.4

)%

23.0

%

4.6

%

%

%

13.2

%

Other income (expense), net

7,035

25,888

32,923

Income (loss) before provision for (benefit from) income taxes

(238,848

)

394,456

76,704

25,888

258,200

Provision for (benefit from) income taxes

(1,861

)

45,755

43,894

Net income (loss)

$

(236,987

)

$

394,456

$

76,704

$

25,888

$

(45,755

)

$

214,306

Net income (loss) per share (1)

$

(1.05

)

$

1.75

$

0.34

$

0.12

$

(0.29

)

$

0.87

(1)

GAAP net loss per share is calculated based upon 224,857 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 246,610 diluted weighted-average shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $38.9 million and total employer payroll tax-related items on employee stock transactions of $37.8 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
Six Months Ended July 31, 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

$

167,768

$

(16,398

)

$

(8,239

)

$

$

$

143,131

Costs of professional services

210,433

(23,310

)

(2,220

)

184,903

Product development

556,424

(143,865

)

(12,757

)

399,802

Sales and marketing

395,235

(54,979

)

(3,619

)

336,637

General and administrative

120,749

(41,170

)

(2,598

)

76,981

Operating income (loss)

(160,246

)

279,722

29,433

148,909

Operating margin

(12.4

)%

21.7

%

2.2

%

%

%

11.5

%

Other income (expense), net

(2,235

)

35,629

33,394

Income (loss) before provision for (benefit from) income taxes

(162,481

)

279,722

29,433

35,629

182,303

Provision for (benefit from) income taxes

(1,915

)

32,870

30,955

Net income (loss)

$

(160,566

)

$

279,722

$

29,433

$

35,629

$

(32,870

)

$

151,348

Net income (loss) per share (1)

$

(0.75

)

$

1.30

$

0.14

$

0.17

$

(0.22

)

$

0.64

 

(1)

GAAP net loss per share is calculated based upon 214,517 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 236,706 diluted weighted-average shares of common stock.

(2)

Other operating expenses include total employer payroll tax-related items on employee stock transactions of $19.0 million and amortization of acquisition-related intangible assets of $10.4 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 was 17%.

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