08/22/2024 | Press release | Distributed by Public on 08/22/2024 14:22
Fiscal Second Quarter Total Revenues of $2.085 Billion, Up 16.7% Year Over Year
Subscription Revenues of $1.903 Billion, Up 17.2% Year Over Year
PLEASANTON, Calif., Aug. 22, 2024 /PRNewswire/ -- Workday, Inc. (NASDAQ: WDAY), a leading provider of solutions to help organizations manage their people and money, today announced results for the fiscal 2025 second quarter ended July 31, 2024.
Fiscal 2025 Second Quarter Results
1 |
See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details. |
Comments on the News
"Workday delivered a solid quarter of growth and operating margin expansion, as businesses of all sizes and industries around the world increasingly turn to Workday as their trusted partner in navigating the future of work," said Carl Eschenbach, CEO, Workday. "Through the power of our unified, AI-powered platform and our expanding partner ecosystem, we're reimagining HR and Finance to consistently increase the value we deliver to our customers. Our commitment to customer success, AI innovation, and delivering true business value will propel us into the future."
"Our second quarter performance was ahead of our expectations across our key financial metrics," said Zane Rowe, CFO, Workday. "We remain focused on balancing targeted investments across our growth areas along with driving efficiencies across the company as we leverage the power of the platform. We see a macroeconomic environment consistent with last quarter and are reiterating our full-year FY25 subscription revenue guidance while slightly raising our expectation for FY25 non-GAAP operating margin."
Recent Highlights
1 |
Gartner® Market Share: Enterprise Application Software as a Service, Worldwide, 2023, Varsha Mehta, Neha Gupta, Chris Pang, Craig Roth, Jim Hare, Julian Poulter, Balaji Abbabatulla, Kevin Quinn, Roland Johnson, Radu Miclaus, Alexandre Oddos, Amarendra ., Anand Chouksey, Mudit Sharma, Kanchi Bindal, 14 June 2024. |
2 |
By Liz Herbert with Linda Ivy-Rosser, George Lawrie, Sara Sjoblom, February 20, 2024. |
Financial Outlook
Workday is updating its guidance for the fiscal 2025 full year ending January 31, 2025 as follows:
Workday is providing guidance for the fiscal 2025 third quarter ending October 31, 2024 as follows:
1 |
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 to predict with reasonable certainty the amount and timing of adjustments that are used to calculate this non-GAAP financial measure, particularly related to stock-based compensation and its related tax effects, acquisition-related costs, and realignment costs. |
Earnings Call Details
Workday plans to host a conference call today to review its fiscal 2025 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.
About Workday
Workday is a leading enterprise platform that helps organizations manage their most important assets - their people and money. The Workday platform is built with AI at the core to help customers elevate people, supercharge work, and move their business forever forward. Workday is used by more than 10,500 organizations around the world and across industries - from medium-sized businesses to more than 60% of the Fortune 500. For more information about Workday, visit workday.com.
© 2024 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.
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding our intended share repurchases, Workday's full-year and third quarter fiscal 2025 subscription revenue and non-GAAP operating margin, growth, innovation, 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) privacy concerns and evolving domestic or foreign laws and regulations; (iv) the impact of continuing global economic and geopolitical volatility on our business, as well as on our customers, prospects, partners, and service providers; (v) any loss of key employees or the inability to attract, train, and retain highly skilled employees; (vi) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (vii) our reliance on our network of partners to drive additional growth of our revenues; (viii) the regulatory, economic, and political risks associated with our domestic and international operations; (ix) adoption of our applications and services by customers and individuals, including any new features, enhancements, and modifications, as well as our customers' and users' satisfaction with the deployment, training, and support services they receive; (x) the regulatory risks related to new and evolving technologies such as AI and our ability to realize a return on our development efforts; (xi) our ability to realize the expected business or financial benefits of any acquisitions of or investments in companies; (xii) delays or reductions in information technology spending; and (xiii) 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 most recent report on Form 10-Q or Form 10-K 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, except as required by law.
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 millions) (unaudited) |
|||
July 31, 2024 |
January 31, 2024 |
||
Assets |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 1,635 |
$ 2,012 |
|
Marketable securities |
5,738 |
5,801 |
|
Trade and other receivables, net |
1,292 |
1,639 |
|
Deferred costs |
237 |
232 |
|
Prepaid expenses and other current assets |
298 |
255 |
|
Total current assets |
9,200 |
9,939 |
|
Property and equipment, net |
1,259 |
1,234 |
|
Operating lease right-of-use assets |
339 |
289 |
|
Deferred costs, noncurrent |
487 |
509 |
|
Acquisition-related intangible assets, net |
331 |
233 |
|
Deferred tax assets |
1,022 |
1,065 |
|
Goodwill |
3,257 |
2,846 |
|
Other assets |
339 |
337 |
|
Total assets |
$ 16,234 |
$ 16,452 |
|
Liabilities and stockholders' equity |
|||
Current liabilities: |
|||
Accounts payable |
$ 87 |
$ 78 |
|
Accrued expenses and other current liabilities |
292 |
287 |
|
Accrued compensation |
487 |
544 |
|
Unearned revenue |
3,549 |
4,057 |
|
Operating lease liabilities |
98 |
89 |
|
Total current liabilities |
4,513 |
5,055 |
|
Debt, noncurrent |
2,982 |
2,980 |
|
Unearned revenue, noncurrent |
62 |
70 |
|
Operating lease liabilities, noncurrent |
284 |
227 |
|
Other liabilities |
48 |
38 |
|
Total liabilities |
7,889 |
8,370 |
|
Stockholders' equity: |
|||
Common stock |
0 |
0 |
|
Additional paid-in capital |
10,869 |
10,400 |
|
Treasury stock |
(1,051) |
(608) |
|
Accumulated other comprehensive income (loss) |
19 |
21 |
|
Accumulated deficit |
(1,492) |
(1,731) |
|
Total stockholders' equity |
8,345 |
8,082 |
|
Total liabilities and stockholders' equity |
$ 16,234 |
$ 16,452 |
Workday, Inc. Condensed Consolidated Statements of Operations (in millions, except number of shares which are reflected in thousands and per share data) (unaudited) |
|||||||
Three Months Ended July 31, |
Six Months Ended July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Revenues: |
|||||||
Subscription services |
$ 1,903 |
$ 1,624 |
$ 3,719 |
$ 3,152 |
|||
Professional services |
182 |
163 |
356 |
319 |
|||
Total revenues |
2,085 |
1,787 |
4,075 |
3,471 |
|||
Costs and expenses (1): |
|||||||
Costs of subscription services |
304 |
256 |
594 |
495 |
|||
Costs of professional services |
207 |
192 |
406 |
371 |
|||
Product development |
649 |
610 |
1,305 |
1,210 |
|||
Sales and marketing |
611 |
524 |
1,184 |
1,043 |
|||
General and administrative |
203 |
169 |
411 |
336 |
|||
Total costs and expenses |
1,974 |
1,751 |
3,900 |
3,455 |
|||
Operating income (loss) |
111 |
36 |
175 |
16 |
|||
Other income (expense), net |
57 |
46 |
116 |
73 |
|||
Income (loss) before provision for (benefit from) income taxes |
168 |
82 |
291 |
89 |
|||
Provision for (benefit from) income taxes |
36 |
3 |
52 |
10 |
|||
Net income (loss) |
$ 132 |
$ 79 |
$ 239 |
$ 79 |
|||
Net income (loss) per share, basic |
$ 0.50 |
$ 0.30 |
$ 0.90 |
$ 0.30 |
|||
Net income (loss) per share, diluted |
$ 0.49 |
$ 0.30 |
$ 0.89 |
$ 0.30 |
|||
Weighted-average shares used to compute net income (loss) per share, basic |
265,317 |
261,191 |
264,885 |
260,026 |
|||
Weighted-average shares used to compute net income (loss) per share, diluted |
267,949 |
264,435 |
269,128 |
262,923 |
|||
(1) Costs and expenses include share-based compensation expenses as follows: |
|||||||
Three Months Ended July 31, |
Six Months Ended July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Costs of subscription services |
$ 35 |
$ 30 |
$ 73 |
$ 59 |
|||
Costs of professional services |
28 |
29 |
59 |
59 |
|||
Product development |
163 |
162 |
336 |
332 |
|||
Sales and marketing |
77 |
67 |
149 |
147 |
|||
General and administrative |
67 |
64 |
138 |
125 |
|||
Total share-based compensation expenses |
$ 370 |
$ 352 |
$ 755 |
$ 722 |
Workday, Inc. Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) |
|||||||
Three Months Ended July 31, |
Six Months Ended July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Cash flows from operating activities: |
|||||||
Net income (loss) |
$ 132 |
$ 79 |
$ 239 |
$ 79 |
|||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|||||||
Depreciation and amortization |
79 |
71 |
154 |
142 |
|||
Share-based compensation expenses |
370 |
352 |
755 |
722 |
|||
Amortization of deferred costs |
62 |
52 |
121 |
101 |
|||
Non-cash lease expense |
25 |
24 |
51 |
48 |
|||
(Gains) losses on investments |
3 |
(1) |
10 |
7 |
|||
Accretion of discounts on marketable debt securities, net |
(29) |
(38) |
(62) |
(72) |
|||
Deferred income taxes |
27 |
0 |
33 |
2 |
|||
Other |
9 |
(6) |
11 |
(12) |
|||
Changes in operating assets and liabilities, net of business combinations: |
|||||||
Trade and other receivables, net |
(157) |
(183) |
351 |
290 |
|||
Deferred costs |
(64) |
(68) |
(104) |
(103) |
|||
Prepaid expenses and other assets |
46 |
25 |
24 |
7 |
|||
Accounts payable |
2 |
2 |
12 |
(56) |
|||
Accrued expenses and other liabilities |
69 |
36 |
(124) |
(187) |
|||
Unearned revenue |
(3) |
80 |
(528) |
(265) |
|||
Net cash provided by (used in) operating activities |
571 |
425 |
943 |
703 |
|||
Cash flows from investing activities: |
|||||||
Purchases of marketable securities |
(1,365) |
(1,585) |
(2,143) |
(3,473) |
|||
Maturities of marketable securities |
1,035 |
1,240 |
2,132 |
2,471 |
|||
Sales of marketable securities |
51 |
25 |
68 |
48 |
|||
Capital expenditures |
(55) |
(65) |
(136) |
(124) |
|||
Business combinations, net of cash acquired |
(10) |
0 |
(522) |
0 |
|||
Purchase of other intangible assets |
0 |
0 |
0 |
(9) |
|||
Purchases of non-marketable equity and other investments |
(7) |
0 |
(7) |
(11) |
|||
Sales and maturities of non-marketable equity and other investments |
5 |
0 |
5 |
0 |
|||
Net cash provided by (used in) investing activities |
(346) |
(385) |
(603) |
(1,098) |
|||
Cash flows from financing activities: |
|||||||
Repurchases of common stock |
(312) |
(139) |
(440) |
(139) |
|||
Proceeds from issuance of common stock from employee equity plans |
106 |
95 |
106 |
95 |
|||
Taxes paid related to net share settlement of equity awards |
(141) |
(5) |
(381) |
(8) |
|||
Net cash provided by (used in) financing activities |
(347) |
(49) |
(715) |
(52) |
|||
Effect of exchange rate changes |
0 |
1 |
0 |
0 |
|||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
(122) |
(8) |
(375) |
(447) |
|||
Cash, cash equivalents, and restricted cash at the beginning of period |
1,771 |
1,456 |
2,024 |
1,895 |
|||
Cash, cash equivalents, and restricted cash at the end of period |
$ 1,649 |
$ 1,448 |
$ 1,649 |
$ 1,448 |
Workday, Inc.
Reconciliations of GAAP to Non-GAAP Data
Reconciliations of our GAAP to non-GAAP operating results are included in the following table (in millions, except percentages and per share data). See the section titled "About Non-GAAP Financial Measures" below for further details.
Three Months Ended July 31, |
Six Months Ended July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Non-GAAP operating income (loss) |
|||||||
Operating income (loss) |
$ 111 |
$ 36 |
$ 175 |
$ 16 |
|||
Share-based compensation expenses |
370 |
352 |
755 |
722 |
|||
Employer payroll tax-related items on employee stock transactions |
10 |
12 |
48 |
37 |
|||
Amortization of acquisition-related intangible assets |
20 |
21 |
37 |
42 |
|||
Acquisition-related costs |
6 |
0 |
10 |
0 |
|||
Realignment costs |
1 |
0 |
8 |
0 |
|||
Non-GAAP operating income (loss) |
$ 518 |
$ 421 |
$ 1,033 |
$ 817 |
|||
Non-GAAP operating margin(1) |
|||||||
Operating margin |
5.3 % |
2.0 % |
4.3 % |
0.5 % |
|||
Share-based compensation expenses |
17.7 % |
19.7 % |
18.5 % |
20.8 % |
|||
Employer payroll tax-related items on employee stock transactions |
0.6 % |
0.7 % |
1.2 % |
1.1 % |
|||
Amortization of acquisition-related intangible assets |
1.0 % |
1.2 % |
1.0 % |
1.1 % |
|||
Acquisition-related costs |
0.3 % |
0.0 % |
0.2 % |
0.0 % |
|||
Realignment costs |
0.0 % |
0.0 % |
0.2 % |
0.0 % |
|||
Non-GAAP operating margin |
24.9 % |
23.6 % |
25.4 % |
23.5 % |
|||
Non-GAAP diluted net income (loss) per share(1)(2) |
|||||||
Diluted net income (loss) per share |
$ 0.49 |
$ 0.30 |
$ 0.89 |
$ 0.30 |
|||
Share-based compensation expenses |
1.38 |
1.33 |
2.80 |
2.74 |
|||
Employer payroll tax-related items on employee stock transactions |
0.04 |
0.05 |
0.18 |
0.14 |
|||
Amortization of acquisition-related intangible assets |
0.07 |
0.08 |
0.14 |
0.16 |
|||
Acquisition-related costs |
0.02 |
0.00 |
0.04 |
0.00 |
|||
Realignment costs |
0.00 |
0.00 |
0.03 |
0.00 |
|||
Losses (gains) on strategic investments, net |
0.01 |
0.00 |
0.04 |
0.03 |
|||
Income tax effects |
(0.26) |
(0.33) |
(0.63) |
(0.61) |
|||
Non-GAAP diluted net income (loss) per share |
$ 1.75 |
$ 1.43 |
$ 3.49 |
$ 2.76 |
(1) |
Operating margin and diluted net income (loss) per share are calculated using unrounded data. |
(2) |
For the three months ended July 31, 2024, GAAP and non-GAAP diluted net income per share were calculated based upon 267,949 diluted |
Reconciliation of our GAAP cash flows from operating activities to non-GAAP free cash flow is as follows (in millions). See the section titled "About Non-GAAP Financial Measures" below for further details.
Three Months Ended July 31, |
Six Months Ended July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Net cash provided by (used in) operating activities |
$ 571 |
$ 425 |
$ 943 |
$ 703 |
|||
Less: Capital expenditures |
(55) |
(65) |
(136) |
(124) |
|||
Free cash flows |
$ 516 |
$ 360 |
$ 807 |
$ 579 |
About Non-GAAP Financial Measures
Change in Non-GAAP Financial Measures
Effective beginning fiscal 2025, Workday will exclude certain acquisition-related costs, realignment costs, and gains and losses on strategic investments from its non-GAAP results as these items may vary from period to period independent of the operating performance of Workday's business. Prior period amounts have been recast for gains and losses on strategic investments to conform to this presentation. There was no impact to prior period amounts presented in this release for acquisition-related costs or realignment costs since no qualifying costs were incurred in the first half of fiscal 2024.
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, non-GAAP diluted net income (loss) per share, 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. 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, amortization expense for acquisition-related intangible assets, acquisition-related costs, and realignment costs. Non-GAAP diluted 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, acquisition-related costs, realignment costs, gains and losses on strategic investments, and income tax effects. Free cash flows differ from GAAP cash flows from operating activities in that it treats capital expenditures 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. 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:
Additionally, with regards to free cash flows, Workday's management believes that reducing cash provided by (used in) operating activities by capital expenditures is meaningful to investors and others because it provides an enhanced view of cash flow generation from the ongoing operations of our business, and it balances operating results, cash management, and capital efficiency.
The use of these non-GAAP measures have certain limitations as they do not reflect all items of expense or cash 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.
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CONTACT: Investor Relations Contact, Justin Furby, [email protected], or Media Contact, Stacey Johnson, [email protected]