10-KPeriod: FY2016

Workday, Inc. Annual Report, Year Ended Jan 31, 2016

Filed March 22, 2016For Securities:WDAY

Summary

This 10-K filing for Workday, Inc. for the fiscal year ended January 31, 2016, highlights the company's strong revenue growth driven by its subscription services, which accounted for 80% of total revenues. Despite significant investments in product development and sales & marketing, the company reported a net loss, a trend consistent with its growth strategy of prioritizing customer acquisition and product innovation over short-term profitability. Workday's cloud-based enterprise applications for finance and human capital management continue to gain traction among large global organizations, evidenced by over 1,200 customers and a substantial backlog of $1.6 billion in non-cancelable subscription contracts. The company faces significant competition from established enterprise software vendors and other cloud-based solution providers. Key risks identified include cybersecurity threats, reliance on third-party data centers, the need to manage rapid growth effectively, and potential market acceptance challenges for new applications. However, Workday's commitment to innovation, a unified cloud platform, and a focus on customer experience remain central to its competitive strategy. Investors should note the dual-class stock structure, which concentrates voting power with the founders, and the company's stated intention to reinvest earnings for future growth rather than paying dividends.

Financial Statements
Beta
Revenue$1.16B
R&D Expenses$469.94M
Operating Expenses$1.41B
Operating Income-$249.79M
Interest Expense$31.93M
Net Income-$275.05M
EPS (Basic)$-1.45
Shares Outstanding (Basic)190.02M

Key Highlights

  • 1Workday achieved total revenues of $1.16 billion for the fiscal year ended January 31, 2016, representing a 48% increase year-over-year, primarily driven by a 52% rise in subscription services revenue.
  • 2The company continues to invest heavily in product development, with $469.9 million spent in fiscal 2016, reflecting its strategy of rapid innovation and feature releases.
  • 3Workday reported a net loss of $289.9 million for fiscal year 2016, underscoring its focus on growth and customer acquisition over immediate profitability.
  • 4The company had over 1,200 customers and a backlog of $1.6 billion in non-cancelable subscription contracts as of January 31, 2016, indicating strong future revenue potential.
  • 5Significant investments in sales and marketing ($434 million in fiscal 2016) are ongoing to expand its customer base, particularly targeting large global enterprises.
  • 6Key risks highlighted include cybersecurity threats, reliance on third-party data centers, and intense competition from established players like SAP and Oracle.
  • 7Workday's strong liquidity position is supported by $2.0 billion in cash, cash equivalents, and marketable securities as of January 31, 2016.

Frequently Asked Questions

Workday provides cloud-based enterprise applications for finance and human capital management. Its primary revenue stream is from subscription services, where customers pay recurring fees for access to its applications, typically on multi-year contracts. Professional services for deployment and training are a secondary revenue source.

Workday's growth strategy focuses on expanding its customer base, particularly among large global organizations, and continuously innovating its product offerings. This involves significant investments in product development, sales and marketing, and expanding its global reach. The company aims to deliver frequent feature releases and new applications to maintain its competitive edge.

Key risks include cybersecurity threats and data breaches, reliance on third-party data center infrastructure, managing rapid growth effectively, intense competition from established software giants and other cloud providers, and potential challenges in customer adoption of new applications. The dual-class stock structure also presents risks related to concentrated voting control.

Workday has a history of cumulative losses and expects losses to continue for the foreseeable future. This is attributed to substantial investments in customer acquisition and product development. While revenue is growing rapidly, the company prioritizes long-term growth over achieving profitability in the near term.