Delaware | 001-35680 | 20-2480422 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I. R. S. Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Workday, Inc. | |
/s/ Robynne D. Sisco | |
Robynne D. Sisco | |
Co-President and Chief Financial Officer |
Exhibit Number | Exhibit Title | |
99.1 |
• | Total revenues were $618.6 million, an increase of 28.9% from the first quarter of fiscal 2018. Subscription revenues were $522.1 million, an increase of 30.6% from the same period last year. |
• | Operating loss was $71.3 million, or negative 11.5% of revenues, compared to an operating loss of $60.2 million, or negative 12.5% of revenues, in the same period last year. Non-GAAP operating income for the first quarter was $80.8 million, or 13.1% of revenues, compared to a non-GAAP operating income of $61.0 million, or 12.7% of revenues, in the same period last year.1 |
• | Net loss per basic and diluted share was $0.35, compared to a net loss per basic and diluted share of $0.31 in the first quarter of fiscal 2018. Non-GAAP net income per diluted share was $0.33, compared to a non-GAAP net income per diluted share of $0.29 in the same period last year.2 |
• | Operating cash flows were $184.2 million and free cash flows were $135.4 million.3 |
• | Cash, cash equivalents, and marketable securities were $3.4 billion as of April 30, 2018. Unearned revenues were over $1.4 billion, a 17.9% increase from the same period last year. |
• | Workday announced that it has promoted Robynne Sisco and Chano Fernandez to co-presidents, expanding their current responsibilities as chief financial officer and global head of field operations, respectively. In addition, Workday appointed Phil Wilmington to vice chairman and Mark Peek to managing director and co-head of Workday Ventures. |
• | Workday announced a $250 million Workday Ventures fund, which will be used to invest in emerging enterprise technology. In addition to Mark Peek, Workday executive Leighanne Levensaler was also named managing director and co-head of Workday Ventures. |
• | Workday was ranked #2 on the list of the World’s Most Innovative Companies by Forbes. |
• | Workday announced that it expanded its global operations, with new offices in Italy, South Africa, and Thailand. |
• | Workday was positioned by Gartner, Inc. in the Leaders quadrant of the Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large, and Global Enterprises. Workday was acknowledged as a Leader for the second year in a row and achieved the furthest overall position for completeness of vision this year.4 |
• | As part of its latest feature release, Workday 30, Workday announced new data discovery capabilities within Workday Prism Analytics that enable customers to more quickly visualize data to understand their financials and people. |
• | Workday announced a strategic partnership with Slack, which will allow customers to complete tasks more efficiently by engaging with Workday from within the Slack interface. |
• | Demonstrating continued commitment to enhancing its compliance programs, Workday received approval from EU data protection authorities for global Binding Corporate Rules for Processors (BCRs) that focus on safeguarding customer data. |
• | In the U.S., Workday was ranked #7 on the list of 100 Best Companies to Work For by Fortune and Great Place to Work Institute. Globally, Workday was named one of the best workplaces by Great Place to Work Institute, ranking #1 in the UK, #2 in Ireland, and #3 in Germany. |
April 30, 2018 | January 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,036,045 | $ | 1,134,355 | |||
Marketable securities | 2,329,623 | 2,133,495 | |||||
Trade and other receivables, net | 354,209 | 528,208 | |||||
Deferred costs | 63,567 | 63,060 | |||||
Prepaid expenses and other current assets | 97,365 | 97,860 | |||||
Total current assets | 3,880,809 | 3,956,978 | |||||
Property and equipment, net | 611,293 | 546,609 | |||||
Deferred costs, noncurrent | 136,248 | 140,509 | |||||
Acquisition-related intangible assets, net | 29,146 | 34,234 | |||||
Goodwill | 159,398 | 159,376 | |||||
Other assets | 110,938 | 109,718 | |||||
Total assets | $ | 4,927,832 | $ | 4,947,424 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 30,249 | $ | 20,998 | |||
Accrued expenses and other current liabilities | 112,977 | 121,879 | |||||
Accrued compensation | 163,383 | 148,247 | |||||
Unearned revenue | 1,319,794 | 1,426,241 | |||||
Current portion of convertible senior notes, net | 570,251 | 341,509 | |||||
Total current liabilities | 2,196,654 | 2,058,874 | |||||
Convertible senior notes, net | 939,242 | 1,149,845 | |||||
Unearned revenue, noncurrent | 95,270 | 110,906 | |||||
Other liabilities | 39,366 | 47,434 | |||||
Total liabilities | 3,270,532 | 3,367,059 | |||||
Stockholders’ equity: | |||||||
Common stock | 215 | 211 | |||||
Additional paid-in capital | 3,489,690 | 3,354,423 | |||||
Accumulated other comprehensive income (loss) | (30,766 | ) | (46,413 | ) | |||
Accumulated deficit | (1,801,839 | ) | (1,727,856 | ) | |||
Total stockholders’ equity | 1,657,300 | 1,580,365 | |||||
Total liabilities and stockholders’ equity | $ | 4,927,832 | $ | 4,947,424 |
Three Months Ended April 30, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
Subscription services | $ | 522,149 | $ | 399,736 | |||
Professional services | 96,494 | 80,125 | |||||
Total revenues | 618,643 | 479,861 | |||||
Costs and expenses (1): | |||||||
Costs of subscription services | 80,245 | 59,798 | |||||
Costs of professional services | 97,726 | 76,913 | |||||
Product development | 263,584 | 196,439 | |||||
Sales and marketing | 192,771 | 155,709 | |||||
General and administrative | 55,581 | 51,202 | |||||
Total costs and expenses | 689,907 | 540,061 | |||||
Operating loss | (71,264 | ) | (60,200 | ) | |||
Other income (expense), net | (3,848 | ) | (1,663 | ) | |||
Loss before provision for (benefit from) income taxes | (75,112 | ) | (61,863 | ) | |||
Provision for (benefit from) income taxes | (702 | ) | 2,181 | ||||
Net loss | $ | (74,410 | ) | $ | (64,044 | ) | |
Net loss per share, basic and diluted | $ | (0.35 | ) | $ | (0.31 | ) | |
Weighted-average shares used to compute net loss per share, basic and diluted | 213,055 | 203,818 |
(1) Costs and expenses include share-based compensation expenses as follows: | |||||||
Costs of subscription services | $ | 7,877 | $ | 5,691 | |||
Costs of professional services | 10,792 | 8,021 | |||||
Product development | 68,511 | 51,029 | |||||
Sales and marketing | 25,612 | 23,159 | |||||
General and administrative | 19,867 | 19,888 |
Three Months Ended April 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (74,410 | ) | $ | (64,044 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 38,664 | 31,797 | |||||
Share-based compensation expenses | 132,659 | 107,788 | |||||
Amortization of deferred costs | 16,360 | 13,637 | |||||
Amortization of debt discount and issuance costs | 18,139 | 6,950 | |||||
Other | (9,289 | ) | 4,258 | ||||
Changes in operating assets and liabilities: | |||||||
Trade and other receivables, net | 168,702 | 111,815 | |||||
Deferred costs | (12,606 | ) | (11,381 | ) | |||
Prepaid expenses and other assets | 8,488 | (3,050 | ) | ||||
Accounts payable | 7,954 | (565 | ) | ||||
Accrued expenses and other liabilities | 11,627 | 4,089 | |||||
Unearned revenue | (122,055 | ) | (21,272 | ) | |||
Net cash provided by (used in) operating activities | 184,233 | 180,022 | |||||
Cash flows from investing activities | |||||||
Purchases of marketable securities | (908,126 | ) | (613,251 | ) | |||
Maturities of marketable securities | 686,676 | 441,870 | |||||
Sales of marketable securities | 27,359 | 9,074 | |||||
Owned real estate projects | (39,233 | ) | (29,539 | ) | |||
Capital expenditures, excluding owned real estate projects | (48,862 | ) | (30,593 | ) | |||
Purchases of non-marketable equity and other investments | (2,400 | ) | (450 | ) | |||
Net cash provided by (used in) investing activities | (284,586 | ) | (222,889 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of common stock from employee equity plans | 2,611 | 2,253 | |||||
Other | (57 | ) | (44 | ) | |||
Net cash provided by (used in) financing activities | 2,554 | 2,209 | |||||
Effect of exchange rate changes | (420 | ) | (132 | ) | |||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (98,219 | ) | (40,790 | ) | |||
Cash, cash equivalents, and restricted cash at the beginning of period | 1,135,654 | 541,894 | |||||
Cash, cash equivalents, and restricted cash at the end of period | $ | 1,037,435 | $ | 501,104 |
Three Months Ended April 30, | |||||||
2018 | 2017 | ||||||
Supplemental cash flow data | |||||||
Cash paid for interest, net of amounts capitalized | $ | 19 | $ | — | |||
Cash paid for income taxes | 1,714 | 1,346 | |||||
Non-cash investing and financing activities: | |||||||
Vesting of early exercised stock options | $ | — | $ | 282 | |||
Purchases of property and equipment, accrued but not paid | 62,196 | 32,515 | |||||
Non-cash additions to property and equipment | 58 | 142 |
April 30, 2018 | April 30, 2017 | ||||||
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows | |||||||
Cash and cash equivalents | $ | 1,036,045 | $ | 498,931 | |||
Restricted cash included in Other assets | 1,390 | 2,173 | |||||
Total cash, cash equivalents, and restricted cash | $ | 1,037,435 | $ | 501,104 |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (2) | Amortization of Debt Discount and Issuance Costs | Income Tax Effects (3) | Non-GAAP | ||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Costs of subscription services | $ | 80,245 | $ | (7,877 | ) | $ | (4,452 | ) | $ | — | $ | — | $ | 67,916 | |||||||||
Costs of professional services | 97,726 | (10,792 | ) | (1,701 | ) | — | — | 85,233 | |||||||||||||||
Product development | 263,584 | (68,511 | ) | (8,797 | ) | — | — | 186,276 | |||||||||||||||
Sales and marketing | 192,771 | (25,612 | ) | (2,580 | ) | — | — | 164,579 | |||||||||||||||
General and administrative | 55,581 | (19,867 | ) | (1,867 | ) | — | — | 33,847 | |||||||||||||||
Operating income (loss) | (71,264 | ) | 132,659 | 19,397 | — | — | 80,792 | ||||||||||||||||
Operating margin | (11.5 | )% | 21.4 | % | 3.2 | % | — | % | — | % | 13.1 | % | |||||||||||
Other income (expense), net | (3,848 | ) | — | — | 18,139 | — | 14,291 | ||||||||||||||||
Income (loss) before provision for (benefit from) income taxes | (75,112 | ) | 132,659 | 19,397 | 18,139 | — | 95,083 | ||||||||||||||||
Provision for (benefit from) income taxes | (702 | ) | — | — | — | 16,866 | 16,164 | ||||||||||||||||
Net income (loss) | $ | (74,410 | ) | $ | 132,659 | $ | 19,397 | $ | 18,139 | $ | (16,866 | ) | $ | 78,919 | |||||||||
Net income (loss) per share (1) | $ | (0.35 | ) | $ | 0.62 | $ | 0.09 | $ | 0.09 | $ | (0.12 | ) | $ | 0.33 |
(1) | GAAP net loss per share is calculated based upon 213,055 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 236,027 diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $14.3 million and amortization of acquisition-related intangible assets of $5.1 million. |
(3) | We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2019, we have determined the projected non-GAAP tax rate to be 17%. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (2) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 59,798 | $ | (5,691 | ) | $ | (546 | ) | $ | — | $ | 53,561 | |||||||
Costs of professional services | 76,913 | (8,021 | ) | (906 | ) | — | 67,986 | ||||||||||||
Product development | 196,439 | (51,029 | ) | (8,962 | ) | — | 136,448 | ||||||||||||
Sales and marketing | 155,709 | (23,159 | ) | (1,674 | ) | — | 130,876 | ||||||||||||
General and administrative | 51,202 | (19,888 | ) | (1,318 | ) | — | 29,996 | ||||||||||||
Operating income (loss) | (60,200 | ) | 107,788 | 13,406 | — | 60,994 | |||||||||||||
Operating margin | (12.5 | )% | 22.5 | % | 2.7 | % | — | % | 12.7 | % | |||||||||
Other income (expense), net | (1,663 | ) | — | — | 6,950 | 5,287 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (61,863 | ) | 107,788 | 13,406 | 6,950 | 66,281 | |||||||||||||
Provision for (benefit from) income taxes | 2,181 | — | — | — | 2,181 | ||||||||||||||
Net income (loss) | $ | (64,044 | ) | $ | 107,788 | $ | 13,406 | $ | 6,950 | $ | 64,100 | ||||||||
Net income (loss) per share (1) | $ | (0.31 | ) | $ | 0.53 | $ | 0.05 | $ | 0.02 | $ | 0.29 |
(1) | GAAP net loss per share is calculated based upon 203,818 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 222,065 diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $8.5 million and amortization of acquisition-related intangible assets of $4.9 million recorded as part of product development expenses. |
Three Months Ended April 30, | Trailing Twelve Months Ended April 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net cash provided by (used in) operating activities | $ | 184,233 | $ | 180,022 | $ | 469,938 | $ | 367,831 | |||||||
Capital expenditures, excluding owned real estate projects | (48,862 | ) | (30,593 | ) | (159,805 | ) | (116,928 | ) | |||||||
Free cash flows | $ | 135,371 | $ | 149,429 | $ | 310,133 | $ | 250,903 |
• | 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 forfeitures rates that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses are not reflective of the value ultimately received by the grant recipients. |
• | Other operating expenses. Other operating expenses includes employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus we do not believe it is reflective of ongoing operations. |
• | Amortization of debt discount and issuance costs. Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the convertible senior notes that were issued in private placements in June 2013 and September 2017. Accordingly, for GAAP purposes we are required to recognize the effective interest expense on our convertible senior notes and amortize the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense, and the amortization expense of issuance costs are excluded from management's assessment of our operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of Workday's operational performance. |
• | Income tax effects. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of share-based compensation and related employer payroll taxes, amortization of acquisition-related intangible assets and amortization of debt discount and issuance costs. The projected rate also assumes no new acquisition activity in the three-year period and 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 2019, we have determined the projected non-GAAP tax rate to be 17%. We will periodically re-evaluate this tax rate, as necessary, for significant events, based on our ongoing analysis of the 2017 U.S Tax Cuts and Jobs Act, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions. |