Press Release

Workday Announces Fiscal 2024 Second Quarter Financial Results

Fiscal Second Quarter Total Revenues of $1.79 Billion, Up 16.3% Year Over Year

Subscription Revenues of $1.62 Billion, Up 18.8% Year Over Year

24-Month Subscription Revenue Backlog of $10.27 Billion, Up 22.7% Year Over Year

Total Subscription Revenue Backlog of $17.85 Billion, Up 32.5% Year Over Year

PLEASANTON, Calif., Aug. 24, 2023 /PRNewswire/ -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2024 second quarter ended July 31, 2023.

Fiscal 2024 Second Quarter Results

  • Total revenues were $1.79 billion, an increase of 16.3% from the second quarter of fiscal 2023. Subscription revenues were $1.62 billion, an increase of 18.8% from the same period last year.
  • Operating income was $36.3 million, or 2.0% of revenues, compared to an operating loss of $34.1 million, or negative 2.2% of revenues, in the same period last year. Non-GAAP operating income for the second quarter was $421.4 million, or 23.6% of revenues, compared to a non-GAAP operating income of $301.6 million, or 19.6% of revenues, in the same period last year.1
  • Basic and diluted net income per share was $0.30, compared to basic and diluted net loss per share of $0.25 in the second quarter of fiscal 2023. Non-GAAP basic and diluted net income per share was $1.45 and $1.43, respectively, compared to non-GAAP basic and diluted net income per share of $0.86 and $0.83, respectively, in the same period last year.2
  • Operating cash flows were $425.3 million compared to $114.4 million in the prior year.
  • Cash, cash equivalents, and marketable securities were $6.66 billion as of July 31, 2023.

Comments on the News

"We're incredibly well positioned going into the second half of our fiscal year as Workday is increasingly seen as the system of trust for enterprises around the world," said Carl Eschenbach, co-CEO, Workday. "Our customers – now representing more than 65 million users under contract – rely on Workday to manage critical business processes. Our growing customer base, continued global expansion, industry growth, and partner ecosystem momentum set us up for durable long-term success. These factors, combined with the diversity of our products, the strength of our value proposition, and our winning culture make Workday one of the most enduring software businesses of our time."

"Workday delivered another strong quarter, driven by our ongoing focus on employees, customers, and innovation – including our leadership in AI and ML," said Aneel Bhusri, co-founder, co-CEO, and chair, Workday. "We're seeing continued momentum with more than 3,000 customers sharing their data with our ML models, more than 50 million ML inferences processed per day, and multiple generative AI capabilities in development including several that we plan to unveil next month at Workday Rising. We believe this momentum will continue to grow as more companies look to Workday as their trusted partner in responsible implementation of AI and ML."

"The strength of our Q2 results and momentum going into the second half of our fiscal year highlight the compelling opportunity ahead for Workday," said Zane Rowe, chief financial officer, Workday. "We are raising our fiscal 2024 subscription revenue guidance to a range of $6.570 billion to $6.590 billion, representing 18% year-over-year growth. We expect third-quarter subscription revenue to be $1.678 billion to $1.680 billion, or 17% growth. In addition, we are raising our fiscal 2024 non-GAAP operating margin guidance to 23.5%, and we plan on maintaining a disciplined approach of investing in long-term growth while expanding margins."

Recent Highlights

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2024 second 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 and non-GAAP operating margin exclude 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, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

3

Gartner, Voice of the Customer for Financial Planning Software, May 2023.

 

Gartner Disclaimer

Gartner and Peer InsightsTM are trademarks of Gartner, Inc. and/or its affiliates. All rights reserved. Gartner Peer Insights Customers' Choice constitute the subjective opinions of individual end-user reviews, ratings, and data applied against a documented methodology; they neither represent the views of, nor constitute an endorsement by, Gartner or its affiliates. Gartner does not endorse any vendor, product or service depicted in this content nor makes any warranties, expressed or implied, with respect to this content, about its accuracy or completeness, 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, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics are built with artificial intelligence and machine learning at the core to help organizations around the world embrace the future of work. Workday is used by more than 10,000 organizations around the world and across industries – from medium-sized businesses to more than 50% of the Fortune 500. For more information about Workday, visit workday.com.

© 2023 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.

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." The Company has not provided a reconciliation of its forward outlook for non-GAAP operating margin with its forward-looking GAAP operating margin in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to quantify share-based compensation expense, which is excluded from our non-GAAP operating margin, as it 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 full-year fiscal 2024 subscription revenues and non-GAAP operating margin, third quarter subscription revenue, growth and expansion, innovation, momentum, opportunity, demand, strategy, and investments. These forward-looking statements are based only on currently available information and our current beliefs, expectations, and assumptions. Because forward-looking statements relate to the future, they are subject to risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control. If the risks materialize, assumptions prove incorrect, or we experience unexpected changes in circumstances, actual results could differ materially from the results implied by these forward-looking statements, and therefore you should not rely on any forward-looking statements. Risks include, but are not limited to: (i) breaches in our security measures or those of our third-party providers, unauthorized access to our customers' or other users' personal data, or disruptions in our data center or computing infrastructure operations; (ii) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (iii) the impact of recent macroeconomic events, including inflation and rising interest rates, on our business, as well as our customers, prospects, partners, and service providers; (iv) our ability to manage our growth effectively; (v) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, 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 and individuals, including any new features, enhancements, and modifications, as well as the acceptance of any underlying technology such as machine learning and artificial intelligence; (viii) our ability to implement our plans, objectives, and other expectations with respect to any of our acquired companies; (ix) the regulatory risks related to new and evolving technologies such as machine learning and artificial intelligence; (x) our reliance on our network of partners to drive additional growth of our revenues; (xi) adverse changes in general economic or market conditions; (xii) the regulatory, economic, and political risks associated with our domestic and international operations; (xiii) delays or reductions in information technology spending; and (xiv) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on these and additional 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 fiscal quarter ended July 31, 2023, and other reports that we have filed and will 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.

Workday, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 
 

July 31, 2023

 

January 31, 2023

Assets

     

Current assets:

     

Cash and cash equivalents

$     1,435,690

 

$     1,886,311

Marketable securities

5,221,401

 

4,235,083

Trade and other receivables, net

1,270,936

 

1,570,086

Deferred costs

198,677

 

191,054

Prepaid expenses and other current assets

254,990

 

225,690

Total current assets

8,381,694

 

8,108,224

Property and equipment, net

1,221,834

 

1,201,254

Operating lease right-of-use assets

262,140

 

249,278

Deferred costs, noncurrent

415,687

 

420,988

Acquisition-related intangible assets, net

263,056

 

305,465

Goodwill

2,840,044

 

2,840,044

Other assets

350,860

 

360,985

Total assets

$   13,735,315

 

$   13,486,238

Liabilities and stockholders' equity

     

Current liabilities:

     

Accounts payable

$          88,814

 

$        153,751

Accrued expenses and other current liabilities

259,426

 

260,131

Accrued compensation

425,911

 

563,548

Unearned revenue

3,308,998

 

3,559,393

Operating lease liabilities

98,810

 

91,343

Total current liabilities

4,181,959

 

4,628,166

Debt, noncurrent

2,977,845

 

2,975,934

Unearned revenue, noncurrent

60,463

 

74,540

Operating lease liabilities, noncurrent

192,138

 

181,799

Other liabilities

48,357

 

40,231

Total liabilities

7,460,762

 

7,900,670

Stockholders' equity:

     

Common stock

263

 

259

Additional paid-in capital

9,637,303

 

8,828,639

Treasury stock

(323,695)

 

(185,047)

Accumulated other comprehensive income (loss)

(6,780)

 

53,051

Accumulated deficit

(3,032,538)

 

(3,111,334)

Total stockholders' equity

6,274,553

 

5,585,568

Total liabilities and stockholders' equity

$   13,735,315

 

$   13,486,238

 

Workday, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 
 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

2023

 

2022

 

2023

 

2022

Revenues:

             

Subscription services

$    1,623,939

 

$    1,367,335

 

$    3,151,848

 

$    2,639,411

Professional services

162,827

 

168,463

 

319,230

 

331,044

Total revenues

1,786,766

 

1,535,798

 

3,471,078

 

2,970,455

Costs and expenses (1):

             

Costs of subscription services

255,684

 

244,982

 

494,711

 

477,904

Costs of professional services

192,416

 

178,103

 

370,833

 

348,002

Product development

609,677

 

547,835

 

1,210,134

 

1,089,344

Sales and marketing

524,186

 

458,701

 

1,042,823

 

888,002

General and administrative

168,546

 

140,255

 

336,120

 

274,124

Total costs and expenses

1,750,509

 

1,569,876

 

3,454,621

 

3,077,376

Operating income (loss)

36,257

 

(34,078)

 

16,457

 

(106,921)

Other income (expense), net

45,555

 

(32,789)

 

72,264

 

(52,952)

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

81,812

 

(66,867)

 

88,721

 

(159,873)

Provision for (benefit from) income taxes

3,152

 

(2,709)

 

9,925

 

6,458

Net income (loss)

$        78,660

 

$       (64,158)

 

$        78,796

 

$     (166,331)

Net income (loss) per share, basic

$            0.30

 

$           (0.25)

 

$            0.30

 

$           (0.66)

Net income (loss) per share, diluted

$            0.30

 

$           (0.25)

 

$            0.30

 

$           (0.66)

Weighted-average shares used to compute net income (loss) per share, basic

261,191

 

254,355

 

260,026

 

253,071

Weighted-average shares used to compute net income (loss) per share, diluted

264,435

 

254,355

 

262,923

 

253,071

         

(1) Costs and expenses include share-based compensation expenses as follows:

       
 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

2023

 

2022

 

2023

 

2022

Costs of subscription services

$        29,988

 

$        25,090

 

$        59,250

 

$        51,320

Costs of professional services

28,754

 

25,838

 

58,794

 

53,422

Product development

161,975

 

147,181

 

331,909

 

300,485

Sales and marketing

66,632

 

59,878

 

146,755

 

119,047

General and administrative

64,563

 

50,020

 

124,664

 

95,239

Total share-based compensation expenses

$      351,912

 

$      308,007

 

$      721,372

 

$      619,513

 

Workday, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

2023

 

2022

 

2023

 

2022

Cash flows from operating activities:

             

Net income (loss)

$        78,660

 

$        (64,158)

 

$        78,796

 

$      (166,331)

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

             

Depreciation and amortization

71,415

 

92,695

 

141,856

 

182,541

Share-based compensation expenses

351,912

 

308,007

 

721,372

 

619,513

Amortization of deferred costs

52,094

 

42,258

 

100,982

 

81,685

Non-cash lease expense

24,283

 

22,911

 

48,157

 

44,959

(Gains) losses on investments

(865)

 

16,499

 

7,276

 

24,579

Other

(43,872)

 

11,413

 

(81,460)

 

12,122

Changes in operating assets and liabilities:

             

Trade and other receivables, net

(183,387)

 

(324,841)

 

289,928

 

138,123

Deferred costs

(68,509)

 

(64,742)

 

(103,304)

 

(106,471)

Prepaid expenses and other assets

25,447

 

(9,885)

 

6,635

 

(33,882)

Accounts payable

2,483

 

(4,142)

 

(55,827)

 

2,768

Accrued expenses and other liabilities

36,003

 

25,065

 

(187,311)

 

(5,808)

Unearned revenue

79,600

 

63,278

 

(264,520)

 

(239,723)

Net cash provided by (used in) operating activities

425,264

 

114,358

 

702,580

 

554,075

Cash flows from investing activities:

             

Purchases of marketable securities

(1,585,332)

 

(1,329,471)

 

(3,473,222)

 

(3,340,090)

Maturities of marketable securities

1,239,613

 

984,887

 

2,471,442

 

1,586,362

Sales of marketable securities

25,495

 

28,237

 

47,678

 

33,367

Owned real estate projects

(1,366)

 

(245)

 

(1,688)

 

(265)

Capital expenditures, excluding owned real estate projects

(63,753)

 

(168,598)

 

(122,529)

 

(227,348)

Purchase of other intangible assets

 

 

(9,500)

 

Purchases of non-marketable equity and other investments

 

(1,900)

 

(10,500)

 

(16,923)

Sales and maturities of non-marketable equity and other investments

 

95

 

 

7,161

Net cash provided by (used in) investing activities

(385,343)

 

(486,995)

 

(1,098,319)

 

(1,957,736)

Cash flows from financing activities:

             

Proceeds from issuance of debt, net of debt discount

 

 

 

2,978,077

Repayments and extinguishment of debt

 

(30)

 

 

(693,983)

Payments for debt issuance costs

 

 

 

(7,220)

Repurchases of common stock

(138,647)

 

 

(138,647)

 

Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld

90,196

 

83,302

 

87,296

 

84,292

Other

(145)

 

(185)

 

(405)

 

(377)

Net cash provided by (used in) financing activities

(48,596)

 

83,087

 

(51,756)

 

2,360,789

Effect of exchange rate changes

218

 

(145)

 

89

 

(830)

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

(8,457)

 

(289,695)

 

(447,406)

 

956,298

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

1,456,291

 

2,786,738

 

1,895,240

 

1,540,745

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

$    1,447,834

 

$    2,497,043

 

$    1,447,834

 

$    2,497,043

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Three Months Ended July 31, 2023 

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$ 255,684

 

$  (29,988)

 

$  (14,688)

 

$          —

 

$ 211,008

Costs of professional services

192,416

 

(28,754)

 

(1,425)

 

 

162,237

Product development

609,677

 

(161,975)

 

(4,543)

 

 

443,159

Sales and marketing

524,186

 

(66,632)

 

(11,035)

 

 

446,519

General and administrative

168,546

 

(64,563)

 

(1,572)

 

 

102,411

Operating income (loss)

36,257

 

351,912

 

33,263

 

 

421,432

Operating margin

2.0 %

 

19.7 %

 

1.9 %

 

— %

 

23.6 %

Other income (expense), net

45,555

 

 

 

 

45,555

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

81,812

 

351,912

 

33,263

 

 

466,987

Provision for (benefit from) income taxes

3,152

 

 

 

85,575

 

88,727

Net income (loss)

$   78,660

 

$ 351,912

 

$   33,263

 

$  (85,575)

 

$ 378,260

Net income (loss) per share, basic (1)

$       0.30

 

$       1.35

 

$       0.13

 

$      (0.33)

 

$       1.45

Net income (loss) per share, diluted (1)

$       0.30

 

$       1.33

 

$       0.13

 

$      (0.33)

 

$       1.43

   

(1)

GAAP and non-GAAP net income per share are both calculated based upon 261,191 basic and 264,435 diluted weighted-average

shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $21.2 million and employer payroll tax-related

items on employee stock transactions of $12.1 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 reporting periods. For fiscal 2024, the non-GAAP tax rate is 19%.

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Three Months Ended July 31, 2022

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$ 244,982

 

$  (25,090)

 

$  (14,596)

 

$          —

 

$ 205,296

Costs of professional services

178,103

 

(25,838)

 

(775)

 

 

151,490

Product development

547,835

 

(147,181)

 

(2,236)

 

 

398,418

Sales and marketing

458,701

 

(59,878)

 

(9,388)

 

 

389,435

General and administrative

140,255

 

(50,020)

 

(628)

 

 

89,607

Operating income (loss)

(34,078)

 

308,007

 

27,623

 

 

301,552

Operating margin

(2.2) %

 

20.1 %

 

1.7 %

 

— %

 

19.6 %

Other income (expense), net

(32,789)

 

 

 

 

(32,789)

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

(66,867)

 

308,007

 

27,623

 

 

268,763

Provision for (benefit from) income taxes

(2,709)

 

 

 

53,773

 

51,064

Net income (loss)

$  (64,158)

 

$ 308,007

 

$   27,623

 

$  (53,773)

 

$ 217,699

Net income (loss) per share, basic (1)

$      (0.25)

 

$       1.21

 

$       0.11

 

$      (0.21)

 

$       0.86

Net income (loss) per share, diluted (1)

$      (0.25)

 

$       1.21

 

$       0.11

 

$      (0.24)

 

$       0.83

   

(1)

GAAP net loss per share is calculated based upon 254,355 basic and diluted weighted-average shares of common stock. Non-GAAP

net income per share is calculated based upon 254,355 basic and 262,931 diluted weighted-average shares of common stock. The

numerator used to compute non-GAAP diluted net income per share was increased by $1.3 million for after-tax interest expense on

our convertible senior notes in accordance with the if-converted method.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $21.5 million and employer payroll tax-related

items on employee stock transactions of $6.1 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 reporting periods. For fiscal 2023, the non-GAAP tax rate was 19%. Included in the per share amount is a dilution impact

of $0.03 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Six Months Ended July 31, 2023 

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$ 494,711

 

$  (59,250)

 

$  (30,360)

 

$             —

 

$ 405,101

Costs of professional services

370,833

 

(58,794)

 

(4,440)

 

 

307,599

Product development

1,210,134

 

(331,909)

 

(15,800)

 

 

862,425

Sales and marketing

1,042,823

 

(146,755)

 

(24,784)

 

 

871,284

General and administrative

336,120

 

(124,664)

 

(4,163)

 

 

207,293

Operating income (loss)

16,457

 

721,372

 

79,547

 

 

817,376

Operating margin

0.5 %

 

20.8 %

 

2.2 %

 

— %

 

23.5 %

Other income (expense), net

72,264

 

 

 

 

72,264

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

88,721

 

721,372

 

79,547

 

 

889,640

Provision for (benefit from) income taxes

9,925

 

 

 

159,106

 

169,031

Net income (loss)

$   78,796

 

$ 721,372

 

$   79,547

 

$  (159,106)

 

$ 720,609

Net income (loss) per share, basic (1)

$       0.30

 

$       2.77

 

$       0.31

 

$        (0.61)

 

$       2.77

Net income (loss) per share, diluted (1)

$       0.30

 

$       2.74

 

$       0.30

 

$        (0.60)

 

$       2.74

   

(1)

GAAP and non-GAAP net income per share are both calculated based upon 260,026 basic and 262,923 diluted weighted-average

shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $42.4 million and employer payroll tax-related

items on employee stock transactions of $37.1 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 reporting periods. For fiscal 2024, the non-GAAP tax rate is 19%.

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Six Months Ended July 31, 2022

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$   477,904

 

$  (51,320)

 

$  (30,922)

 

$          —

 

$ 395,662

Costs of professional services

348,002

 

(53,422)

 

(4,674)

 

 

289,906

Product development

1,089,344

 

(300,485)

 

(15,247)

 

 

773,612

Sales and marketing

888,002

 

(119,047)

 

(23,434)

 

 

745,521

General and administrative

274,124

 

(95,239)

 

(3,241)

 

 

175,644

Operating income (loss)

(106,921)

 

619,513

 

77,518

 

 

590,110

Operating margin

(3.6) %

 

20.9 %

 

2.6 %

 

— %

 

19.9 %

Other income (expense), net

(52,952)

 

 

 

 

(52,952)

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

(159,873)

 

619,513

 

77,518

 

 

537,158

Provision for (benefit from) income taxes

6,458

 

 

 

95,601

 

102,059

Net income (loss)

$  (166,331)

 

$ 619,513

 

$   77,518

 

$  (95,601)

 

$ 435,099

Net income (loss) per share, basic (1)

$        (0.66)

 

$       2.45

 

$       0.31

 

$      (0.38)

 

$       1.72

Net income (loss) per share, diluted (1)

$        (0.66)

 

$       2.45

 

$       0.31

 

$      (0.44)

 

$       1.66

   

(1)

GAAP net loss per share is calculated based upon 253,071 basic and diluted weighted-average shares of common stock. Non-GAAP

net income per share is calculated based upon 253,071 basic and 263,224 diluted weighted-average shares of common stock.

The numerator used to compute non-GAAP diluted net income per share was increased by $2.6 million for after-tax interest expense

on our convertible senior notes in accordance with the if-converted method.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $43.1 million and employer payroll tax-related

items on employee stock transactions of $34.4 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 reporting periods. For fiscal 2023, the non-GAAP tax rate was 19%. Included in the per share amount is a dilution impact

of $0.06 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

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), non-GAAP operating margin, 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) and non-GAAP operating margin differ from GAAP in that they exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization expense for 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 expense for acquisition-related intangible assets, 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. 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. Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
  • 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 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 2024 and 2023, we determined the projected non-GAAP tax rate to be 19%, which reflects currently available information, as well as other factors and assumptions. 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), non-GAAP operating margin, and non-GAAP net income (loss) per share measures have certain limitations as they do not reflect all items of 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.

For further information: Investor Relations Contact: Justin Furby, ir@workday.com; Media Contact: Stacey Johnson, media@workday.com


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