10-QPeriod: Q3 FY2014

Workday, Inc. Quarterly Report for Q3 Ended Oct 31, 2013

Filed December 2, 2013For Securities:WDAY

Summary

Workday, Inc.'s 10-Q filing for the period ending October 30, 2013, highlights several key risk factors and financial considerations for investors. The company, operating as an emerging growth company under the JOBS Act, utilizes certain exemptions from reporting requirements, which could lead to a less active trading market and increased stock price volatility. Significant risks include the potential inability to utilize Net Operating Loss (NOL) and research tax credit carryforwards, which could impact future profitability. Furthermore, evolving tax laws for electronic services and potential changes in accounting principles could adversely affect financial results and customer costs. The company has also incurred substantial indebtedness through the issuance of convertible senior notes totaling $600 million in 2013, with maturities in 2018 and 2020. The conversion of these notes or related hedging and warrant transactions could dilute existing stockholders' ownership and impact the stock price. Investors should also note the dual-class stock structure, which concentrates voting control with the co-CEOs and other insiders, potentially limiting the influence of minority shareholders on corporate matters.

Financial Highlights

42 data points
Beta

Revenue

$127.87M

62.0% Gross Margin

Net Income

-$47.53M

-37.2% Net Margin

EPS (Diluted)

$-0.27

Total Assets

$1.53B

Cash & Equivalents

$183.46M

Free Cash Flow

$7.08M

Financial Statements
Beta
Revenue$127.87M
Cost of Revenue$48.59M
Gross Profit$79.28M
R&D Expenses$49.35M
Operating Expenses$168.27M
Operating Income-$40.40M
Interest Expense$7.66M
Net Income-$47.53M
EPS (Basic)$-0.27
Shares Outstanding (Basic)174.38M

Key Highlights

  • 1Workday is utilizing exemptions as an Emerging Growth Company under the JOBS Act, potentially affecting market liquidity and stock price volatility.
  • 2Significant tax-related risks include the potential non-utilization of Net Operating Loss (NOL) and research tax credit carryforwards, impacting future profitability.
  • 3The company has issued $600 million in convertible senior notes (2018 and 2020 maturities), introducing significant debt obligations and potential dilution risks upon conversion.
  • 4The dual-class stock structure grants substantial voting control to co-founders/co-CEOs and insiders, limiting the influence of non-affiliate shareholders on corporate decisions.
  • 5The company has not paid dividends and intends to retain future earnings for business operations and expansion, meaning investors must rely on stock appreciation for returns.
  • 6Volatility in the stock price is a notable risk, influenced by various market, company-specific, and industry factors.
  • 7Workday has broad discretion in the use of IPO and convertible note proceeds, and their effectiveness could impact business performance and investor returns.

Frequently Asked Questions

Workday has incurred significant indebtedness through the issuance of convertible senior notes. In June 2013, they issued $350.0 million of 2018 Notes and an additional $250.0 million of 2020 Notes, totaling $600.0 million. Repayment is due at maturity in 2018 and 2020, respectively, or upon certain fundamental changes. This debt could impact their ability to meet other obligations and secure future financing.

Workday has a dual-class stock structure where Class B common stock holds ten votes per share, and publicly traded Class A common stock holds one vote per share. The co-founders and co-CEOs, along with other insiders, hold a substantial majority of the voting power, primarily through Class B shares. This concentration of control means that non-affiliate shareholders will have limited ability to influence corporate matters, including the election of directors and major corporate decisions, for the foreseeable future.

Workday faces risks related to tax laws. They may not be able to utilize a significant portion of their net operating loss (NOL) and research tax credit carryforwards, which could adversely affect profitability as these credits begin to expire. Additionally, evolving tax laws concerning electronic services, or adverse interpretations of existing laws, could increase costs for Workday or its customers and negatively impact operating results.

No, Workday currently does not intend to pay cash dividends on its capital stock. The company plans to retain any future earnings to finance operations and expansion. Therefore, investors must rely on potential stock price appreciation as their primary means of realizing gains on their investment.