10-QPeriod: Q2 FY2016

Workday, Inc. Quarterly Report for Q2 Ended Jul 31, 2015

Filed September 4, 2015For Securities:WDAY

Summary

Workday, Inc. reported strong revenue growth for the three and six months ended July 31, 2015. Total revenues increased by 51% and 54% year-over-year, respectively, primarily driven by a robust 56% and 59% increase in subscription services revenue. This indicates continued market acceptance and demand for Workday's cloud-based HCM and financial management applications. Despite significant revenue growth, the company continues to operate at a net loss, with a loss of $69.4 million for the three-month period and $131.0 million for the six-month period. This is largely due to substantial investments in product development, sales, and marketing, reflecting the company's strategy to fuel long-term growth. The company's cash position remains strong, with over $1.9 billion in cash and marketable securities, providing ample liquidity for ongoing operations and strategic investments.

Financial Highlights

41 data points
Beta

Revenue

$282.70M

Net Income

-$69.42M

-24.6% Net Margin

EPS (Diluted)

$-0.37

Total Assets

$2.44B

Cash & Equivalents

$230.58M

Free Cash Flow

$15.19M

Financial Statements
Beta
Revenue$282.70M
R&D Expenses$115.34M
Operating Expenses$350.34M
Operating Income-$67.64M
Interest Expense$7.95M
Net Income-$69.42M
EPS (Basic)$-0.37
Shares Outstanding (Basic)189.36M

Key Highlights

  • 1Total revenues increased by 51% year-over-year to $282.7 million for the three months ended July 31, 2015.
  • 2Subscription services revenue grew by 56% year-over-year to $223.7 million for the three months ended July 31, 2015, highlighting strong demand for core offerings.
  • 3Professional services revenue increased by 37% year-over-year to $59.0 million for the three months ended July 31, 2015.
  • 4The company reported a net loss of $69.4 million for the three months ended July 31, 2015, consistent with its growth-focused investment strategy.
  • 5Operating expenses, particularly in product development and sales & marketing, increased significantly as a percentage of revenue, reflecting ongoing investments.
  • 6Cash and cash equivalents and marketable securities totaled $1.9 billion as of July 31, 2015, indicating a healthy liquidity position.
  • 7The company reported positive free cash flow of $53.6 million for the six months ended July 31, 2015, a significant improvement from the prior year period.

Frequently Asked Questions

Workday's primary growth driver is its subscription services revenue, which includes fees for access to its cloud-based applications like Human Capital Management (HCM) and Financial Management. For the three months ended July 31, 2015, subscription services revenue grew by 56% year-over-year to $223.7 million, demonstrating strong market demand and customer adoption.

Workday continues to invest heavily in research and development (product development) and sales and marketing to drive future growth and expand its market share. These investments, while necessary for long-term strategy, lead to increased operating expenses, resulting in a net loss. For the three months ended July 31, 2015, the company reported a net loss of $69.4 million.

Workday maintains a strong liquidity position. As of July 31, 2015, the company held $230.6 million in cash and cash equivalents and $1.68 billion in marketable securities, totaling approximately $1.91 billion. This substantial cash reserve provides flexibility for ongoing operations, strategic investments, and potential acquisitions.

Workday has outstanding convertible senior notes totaling $600 million ($350 million due in 2018 and $250 million due in 2020). These notes carry fixed interest rates (0.75% and 1.50%) but their fair value is subject to interest rate fluctuations and, importantly, Workday's stock price. The company has also entered into related hedge and warrant transactions to mitigate potential dilution upon conversion.