10-KPeriod: FY2017

Workday, Inc. Annual Report, Year Ended Jan 31, 2017

Filed March 20, 2017For Securities:WDAY

Summary

Workday, Inc. reported strong revenue growth in its fiscal year ending January 31, 2017, with total revenues reaching $1.57 billion, a 35% increase year-over-year. Subscription services, the primary revenue driver, grew by 39% to $1.29 billion. Despite this robust top-line performance, the company continued to operate at a net loss, reporting a loss of $408 million. This loss is attributed to significant investments in product development, sales, and marketing to fuel future growth, a common characteristic of high-growth SaaS companies. The company's cash position remains healthy, with over $2 billion in cash, cash equivalents, and marketable securities, supported by positive operating cash flow. Management's strategy emphasizes continued investment in innovation and global expansion, with a clear focus on increasing its customer base. Investors should note Workday's continued investment in R&D and sales, which is diluting short-term profitability but is crucial for long-term market leadership. The company's cloud-based, multi-tenant architecture allows for efficient updates and scalability. Key risks identified include cybersecurity threats, reliance on third-party data centers, and the competitive landscape. The dual-class stock structure means founders and early investors retain significant voting control, which may limit the influence of other shareholders.

Financial Highlights

43 data points
Beta

Revenue

$1.57B

Net Income

-$384.70M

-24.4% Net Margin

EPS (Diluted)

$-1.94

Total Assets

$3.27B

Cash & Equivalents

$539.92M

Free Cash Flow

$350.63M

Financial Statements
Beta
Revenue$1.57B
R&D Expenses$680.53M
Operating Expenses$1.93B
Operating Income-$353.09M
Interest Expense$30.10M
Net Income-$384.70M
EPS (Basic)$-1.94
Shares Outstanding (Basic)198.21M

Key Highlights

  • 1Total revenues increased 35% to $1.57 billion for the fiscal year ended January 31, 2017.
  • 2Subscription services revenue, the core business, grew 39% to $1.29 billion.
  • 3The company continues to invest heavily in product development ($681 million) and sales & marketing ($584 million), leading to an operating loss of $377 million.
  • 4Workday ended the fiscal year with a strong liquidity position, holding $2.0 billion in cash, cash equivalents, and marketable securities.
  • 5The company reported positive free cash flow of $228 million.
  • 6Customer base exceeds 1,500, with no single customer representing more than 10% of revenues.
  • 7Workday is expanding its product offerings beyond HCM and Financial Management to include Payroll, Time Tracking, Recruiting, Learning, Planning, and Student applications.

Frequently Asked Questions

Workday provides enterprise cloud applications for finance and human resources. Its primary revenue model is based on subscription services, where customers pay recurring fees for access to Workday's cloud applications, typically under multi-year contracts. They also generate revenue from professional services related to application deployment and customer support.

For the fiscal year ended January 31, 2017, Workday reported a net loss of $408 million. This is consistent with its strategy of heavily investing in product development, sales, and marketing to drive growth, which is common for companies in the rapidly expanding cloud software market. While not GAAP profitable, the company is focused on long-term growth and expanding its market share.

Workday is experiencing rapid growth and is investing heavily in expanding its workforce, product development, and global sales and marketing efforts. The company's strategy involves significant capital expenditure in infrastructure and personnel to support its expanding customer base and new product initiatives. This growth strategy is reflected in increased operating expenses but is aimed at achieving economies of scale and long-term profitability.

Key risks include cybersecurity threats and data breaches, reliance on third-party data center operations, intense competition from established enterprise software vendors like SAP and Oracle, long sales cycles, the need to attract and retain skilled employees, and potential adverse impacts from changes in privacy laws and regulations. The company also highlights the concentration of voting power with its founders due to a dual-class stock structure.