Workday Announces Fiscal 2016 Third Quarter Financial Results
Total Revenues of $305.3 Million, Up 42% Year Over Year; Subscription Revenues of $242.7 Million, Up 48% Year Over Year
/EINPresswire.com/ -- PLEASANTON, CA -- (Marketwired) -- 11/19/15 -- Workday, Inc. (NYSE: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal third quarter ended October 31, 2015.
- Total revenues were $305.3 million, an increase of 42% from the third quarter of fiscal 2015. Subscription revenues were $242.7 million, an increase of 48% from the same period last year.
- Operating loss was $70.2 million, or negative 23.0% of revenues, compared to an operating loss of $51.5 million, or negative 23.9% of revenues, in the same period last year. Non-GAAP operating profit for the third quarter was $0.8 million, or 0.3% of revenues, compared to a non-GAAP operating loss of $2.9 million last year, or negative 1.4% of revenues.(1)
- Net loss per basic and diluted share was $0.41, compared to a net loss per basic and diluted share of $0.33 in the third quarter of fiscal 2015.
- Operating cash flows for the third quarter were $55.1 million and free cash flows were $14.9 million. For the trailing twelve months, operating cash flows were $213.0 million and free cash flows were $79.1 million.(2)
- Cash, cash equivalents and marketable securities were approximately $1.9 billion as of October 31, 2015. Unearned revenues were $718.0 million, a 41% increase from last year.
"We had a strong third quarter, and welcomed our largest financial management and HCM customers to date," said Aneel Bhusri, co-founder and CEO, Workday. "Workday also delivered its best performance in new annual contract value for Workday Financial Management in the history of the company. As we continue this momentum, we are expanding our suite of applications and investing in global capabilities to help more finance organizations make the shift to the cloud with Workday."
"We are very pleased with our outstanding third quarter results," said Mark Peek, co-president and chief financial officer, Workday. "We once again generated record quarterly revenues and trailing twelve month operating cash flows. Looking ahead, we anticipate fourth quarter total revenues to be within a range of $317 and $320 million, or growth of 40% to 41% as compared to the prior year."
Recent Highlights
- Workday held its ninth annual customer conference, Workday Rising, bringing together more than 5,400 members of the Workday community for education and collaboration in Las Vegas.
- Workday unveiled Workday Learning, a new application intended to offer a more personalized, meaningful learning experience for organizations to evolve and encourage career development at every stage of the employee lifecycle. Workday plans to make Workday Learning generally available to customers in the second half of calendar year 2016.
- In its latest feature release, Workday 25, Workday expanded its offerings for global finance organizations with the general availability of Workday Inventory, new reporting and analytics capabilities, and expanded product translations and localizations.
- Workday opened a new office for its European headquarters in Dublin, and announced plans to create another 200 highly-skilled jobs based in the city over the next three years.
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 the company's Investor Relations website at www.workday.com/investorrelations. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 45 days.
(1) Non-GAAP operating profit (loss) for the fiscal third quarters of 2016 and 2015 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) Free cash flows are defined as operating cash flows minus purchased property and equipment, property and equipment acquired under capital leases and purchased other intangible assets. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.
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, and analytics applications designed for the world's largest companies, educational institutions, and government agencies. Hundreds of 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."
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding Workday's fourth quarter revenue projections, future product offerings and employee hiring plans. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," 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 but not limited to 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; (viii) our limited operating history, which makes it difficult to predict future results; and (ix) changes in sales 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, 2015 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.
© 2015. 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)
October 31, January 31,
2015 2015(1)
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 219,893 $ 298,192
Marketable securities 1,676,454 1,559,517
Accounts receivable, net 170,851 188,357
Deferred costs 19,499 20,471
Prepaid expenses and other current assets 70,378 42,502
------------ ------------
Total current assets 2,157,075 2,109,039
Property and equipment, net 195,004 140,136
Deferred costs, noncurrent 23,548 20,998
Goodwill and acquisition-related intangible
assets, net 70,353 34,779
Other assets 65,173 53,681
------------ ------------
Total assets $ 2,511,153 $ 2,358,633
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 16,953 $ 10,623
Accrued expenses and other current liabilities 45,995 24,132
Accrued compensation 63,834 56,152
Capital leases 80 3,207
Unearned revenue 624,819 547,151
------------ ------------
Total current liabilities 751,681 641,265
Convertible senior notes, net 507,947 490,501
Unearned revenue, noncurrent 93,206 85,593
Other liabilities 32,792 15,299
------------ ------------
Total liabilities 1,385,626 1,232,658
Stockholders' equity:
Common stock 191 186
Additional paid-in capital 2,156,551 1,948,300
Accumulated other comprehensive income (loss) (54) (140)
Accumulated deficit (1,031,161) (822,371)
------------ ------------
Total stockholders' equity 1,125,527 1,125,975
------------ ------------
Total liabilities and stockholders' equity $ 2,511,153 $ 2,358,633
============ ============
(1) Amounts as of January 31, 2015 were derived from the January 31, 2015
audited financial statements.
Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
Revenues:
Subscription services $ 242,700 $ 164,403 $ 667,435 $ 431,462
Professional services 62,566 50,667 171,484 130,125
---------- ---------- ---------- ----------
Total revenues 305,266 215,070 838,919 561,587
---------- ---------- ---------- ----------
Costs and expenses(1):
Costs of subscription
services 39,791 27,426 106,860 73,258
Costs of professional
services 61,963 44,363 164,887 121,590
Product development 124,020 85,270 338,700 227,905
Sales and marketing 111,658 80,681 312,983 227,371
General and administrative 38,008 28,796 106,707 76,781
---------- ---------- ---------- ----------
Total costs and expenses 375,440 266,536 1,030,137 726,905
---------- ---------- ---------- ----------
Operating loss (70,174) (51,466) (191,218) (165,318)
Other expense, net (6,722) (8,047) (17,737) (21,999)
---------- ---------- ---------- ----------
Loss before provision for
(benefit from) income taxes (76,896) (59,513) (208,955) (187,317)
Provision for (benefit from)
income taxes 915 399 (165) 1,199
---------- ---------- ---------- ----------
Net loss $ (77,811) $ (59,912) $ (208,790) $ (188,516)
========== ========== ========== ==========
Net loss per share, basic
and diluted $ (0.41) $ (0.33) $ (1.10) $ (1.03)
========== ========== ========== ==========
Weighted-average shares used
to compute net loss per
share, basic and diluted 190,727 184,310 189,185 182,770
========== ========== ========== ==========
(1) Costs and expenses include share-based compensation expenses as
follows:
Costs of
subscription
services $ 3,203 $ 1,959 $ 8,424 $ 4,622
Costs of
professional
services 5,424 4,214 14,022 9,931
Product development 29,547 19,191 78,990 46,796
Sales and marketing 15,321 8,678 36,908 22,807
General and
administrative 15,164 12,966 42,353 32,508
Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------- ------------------------
2015 2014 2015 2014
---------- ---------- ----------- -----------
Cash flows from operating
activities
Net loss $ (77,811) $ (59,912) $ (208,790) $ (188,516)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 22,260 15,682 60,717 42,679
Share-based compensation
expenses 68,659 47,008 180,697 116,664
Amortization of deferred
costs 5,389 5,740 17,749 14,113
Amortization of debt
discount and issuance
costs 6,422 6,083 19,008 18,005
Gain on sale of cost
method investment -- -- (3,220) --
Other 48 1,808 (1,334) 2,654
Changes in operating
assets and liabilities,
net of business
combinations:
Accounts receivable (14,727) (18,598) 17,420 (27,052)
Deferred costs (8,744) (4,340) (19,327) (14,236)
Prepaid expenses and
other assets (9,522) 1,586 (24,998) (8,512)
Accounts payable (3,719) 4,056 461 1,603
Accrued expense and
other liabilities 32,172 15,271 41,270 1,760
Unearned revenue 34,719 26,658 85,063 94,566
---------- ---------- ----------- -----------
Net cash provided by (used
in) operating activities 55,146 41,042 164,716 53,728
Cash flows from investing
activities
Purchases of marketable
securities (623,377) (454,219) (1,485,422) (1,490,404)
Maturities of marketable
securities 551,270 368,984 1,261,863 1,136,456
Sales of available-for-
sale securities 69,187 -- 98,711 8,138
Business combinations, net
of cash acquired (23,577) -- (31,538) (26,317)
Purchases of property and
equipment (40,280) (27,699) (96,252) (65,981)
Purchases of cost method
investments (700) -- (16,450) (10,000)
Sale of cost method
investment -- -- 3,538 --
Other -- -- -- 1,000
---------- ---------- ----------- -----------
Net cash provided by (used
in) investing activities (67,477) (112,934) (265,550) (447,108)
Cash flows from financing
activities
Proceeds from issuance of
common stock from
employee equity plans 2,360 2,615 25,096 20,780
Principal payments on
capital lease obligations (663) (1,123) (3,127) (8,285)
Shares repurchased for tax
withholdings on vesting
of restricted stock -- -- -- (8,291)
Other 246 91 1,025 151
---------- ---------- ----------- -----------
Net cash provided by (used
in) financing activities 1,943 1,583 22,994 4,355
Effect of exchange rate
changes (297) (183) (459) (159)
---------- ---------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents (10,685) (70,492) (78,299) (389,184)
Cash and cash equivalents
at the beginning of
period 230,578 262,634 298,192 581,326
---------- ---------- ----------- -----------
Cash and cash equivalents
at the end of period $ 219,893 $ 192,142 $ 219,893 $ 192,142
========== ========== =========== ===========
Supplemental cash flow
data
Cash paid for interest $ 8 $ 56 $ 3,252 $ 3,614
Cash paid for taxes 618 46 1,652 166
Non-cash investing and
financing activities:
Vesting of early
exercise stock
options $ 472 $ 472 $ 1,416 $ 1,416
Purchases of property
and equipment,
accrued but not paid 17,237 9,052 17,237 9,052
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended October 31, 2015
(in thousands)
(unaudited)
Amortization
of Debt
Share-Based Other Discount and
Compensation Operating Issuance
GAAP Expenses Expenses(1) Costs Non-GAAP
-------- ------------ ----------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 39,791 $ (3,203) $ (64) $ -- $ 36,524
Costs of
professional
services 61,963 (5,424) (107) -- 56,432
Product
development 124,020 (29,547) (1,594) -- 92,879
Sales and
marketing 111,658 (15,321) (196) -- 96,141
General and
administrative 38,008 (15,164) (396) -- 22,448
Operating income
(loss) (70,174) 68,659 2,357 -- 842
Operating margin (23.0)% 22.5% 0.8% -- 0.3%
Other expense,
net (6,722) -- -- 6,422 (300)
Income (loss)
before provision
for income taxes (76,896) 68,659 2,357 6,422 542
Provision for
income taxes 915 -- -- -- 915
Net loss $(77,811) $ 68,659 $ 2,357 $ 6,422 $ (373)
(1) Other operating expenses include employer payroll tax-related items on
employee stock transactions and amortization of acquisition-related
intangible assets.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended October 31, 2014
(in thousands)
(unaudited)
Amortization
of Debt
Share-Based Other Discount and
Compensation Operating Issuance Non-
GAAP Expenses Expenses(1) Costs GAAP
-------- ------------ ----------- ------------ -------
Costs and
expenses:
Costs of
subscription
services $ 27,426 $ (1,959) $ (13) $ -- $25,454
Costs of
professional
services 44,363 (4,214) (69) -- 40,080
Product
development 85,270 (19,191) (628) -- 65,451
Sales and
marketing 80,681 (8,678) (485) -- 71,518
General and
administrative 28,796 (12,966) (330) -- 15,500
Operating loss (51,466) 47,008 1,525 -- (2,933)
Operating margin (23.9)% 21.9% 0.6% -- (1.4)%
Other expense,
net (8,047) -- -- 6,083 (1,964)
Loss before
provision for
income taxes (59,513) 47,008 1,525 6,083 (4,897)
Provision for
income taxes 399 -- -- -- 399
Net loss $(59,912) $ 47,008 $ 1,525 $ 6,083 $(5,296)
(1) Other operating expenses include employer payroll tax-related items on
employee stock transactions and amortization of acquisition-related
intangible assets.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Nine Months Ended October 31, 2015
(in thousands)
(unaudited)
Amortization
of Debt
Share-Based Other Discount and
Compensation Operating Issuance
GAAP Expenses Expenses(1) Costs Non-GAAP
--------- ------------ ----------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 106,860 $ (8,424) $ (326) $ -- $ 98,110
Costs of
professional
services 164,887 (14,022) (631) -- 150,234
Product
development 338,700 (78,990) (4,975) -- 254,735
Sales and
marketing 312,983 (36,908) (1,154) -- 274,921
General and
administrative 106,707 (42,353) (1,499) -- 62,855
Operating loss (191,218) 180,697 8,585 -- (1,936)
Operating
margin (22.8)% 21.6% 1.0% -- (0.2)%
Other income
(expense),
net (17,737) -- -- 19,008 1,271
Loss before
benefit from
income taxes (208,955) 180,697 8,585 19,008 (665)
Benefit from
income taxes (165) -- -- -- (165)
Net loss $(208,790) $ 180,697 $ 8,585 $ 19,008 $ (500)
(1) Other operating expenses include employer payroll tax-related items on
employee stock transactions and amortization of acquisition-related
intangible assets.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Nine Months Ended October 31, 2014
(in thousands)
(unaudited)
Amortization
of Debt
Share-Based Other Discount and
Compensation Operating Issuance
GAAP Expenses Expenses(1) Costs Non-GAAP
--------- ------------ ----------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 73,258 $ (4,622) $ (101) $ -- $ 68,535
Costs of
professional
services 121,590 (9,931) (204) -- 111,455
Product
development 227,905 (46,796) (2,098) -- 179,011
Sales and
marketing 227,371 (22,807) (996) -- 203,568
General and
administrative 76,781 (32,508) (688) -- 43,585
Operating loss (165,318) 116,664 4,087 -- (44,567)
Operating
margin (29.4)% 20.8% 0.7% -- (7.9)%
Other expense,
net (21,999) -- -- 18,005 (3,994)
Loss before
provision for
income taxes (187,317) 116,664 4,087 18,005 (48,561)
Provision for
income taxes 1,199 -- -- -- 1,199
Net loss $(188,516) $ 116,664 $ 4,087 $ 18,005 $(49,760)
(1) Other operating expenses include employer payroll tax-related items on
employee stock transactions and amortization of acquisition-related
intangible assets.
Workday, Inc.
Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
(A Non-GAAP Financial Measure)
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
Net cash provided by (used
in) operating activities $ 55,146 $ 41,042 $ 164,716 $ 53,728
Purchases of property and
equipment (40,280) (27,699) (96,252) (65,981)
---------- ---------- ---------- ----------
Free cash flows $ 14,866 $ 13,343 $ 68,464 $ (12,253)
========== ========== ========== ==========
----------------------
Trailing Twelve Months
Ended
October 31,
----------------------
2015 2014
---------- ----------
Net cash provided by (used
in) operating activities $ 212,991 $ 88,521
Purchases of property and
equipment (133,917) (78,322)
Purchases of other intangible
assets -- (15,000)
---------- ----------
Free cash flows $ 79,074 $ (4,801)
========== ==========
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 free cash flows. Workday has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. The non-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. Free cash flows differ from GAAP cash flows from operating activities in that it treats purchases of property and equipment, property and equipment acquired under capital leases and purchased other (non-acquisition related) intangible assets as a reduction to cash flows.
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 and the ability of operations to generate cash. 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 future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.
Management believes excluding the following items from the GAAP Condensed Consolidated Statement 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 in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. For restricted stock unit awards, the amount of share-based compensation expenses is not reflective of the value ultimately received by the grant recipients. Moreover, determining the fair value of certain of the share-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards. Unlike cash compensation, the value of stock options and shares offered under our Employee Stock Purchase Plan, which are elements of our ongoing share-based compensation expenses, is determined using a complex formula that incorporates factors, such as market volatility and forfeiture rates, that are beyond our control.
- 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 the 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. 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 the company's operational performance.
Additionally, we believe that the non-GAAP financial measure, free cash flows, is meaningful to investors because we review cash flows generated from or used in operations after deducting capital expenditures, whether purchased or leased, and purchased other intangible assets, due to the fact that these expenditures are considered to be an ongoing operational component of our business. This provides an enhanced view of cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.
The use of non-GAAP operating income (loss) has 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 Haase
(925) 951-9005
Michael.Haase@Workday.com
Media Contact:
Eric Glass
(415) 432-3056
Eric.Glass@Workday.com
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