10-QPeriod: Q2 FY2017

Workday, Inc. Quarterly Report for Q2 Ended Jul 31, 2016

Filed September 2, 2016For Securities:WDAY

Summary

Workday, Inc. (WDAY) reported its financial results for the quarter and six months ended July 31, 2016. The company demonstrated strong revenue growth, particularly in its subscription services, which increased by 37% and 38% year-over-year for the three and six-month periods, respectively. This growth was driven by an expanding customer base. Despite the revenue acceleration, Workday continued to operate at a net loss, which widened slightly in dollar terms but improved as a percentage of revenue on a non-GAAP basis. Key financial metrics show continued investment in growth, with operating expenses increasing across all major categories, primarily due to higher employee-related costs resulting from increased headcount. The company's cash position remains robust, supported by a significant amount of cash and marketable securities. Management remains focused on long-term growth initiatives, indicating continued investment in product development, sales, and marketing, which is expected to drive future revenue expansion.

Financial Highlights

42 data points
Beta

Revenue

$373.66M

Net Income

-$107.81M

-28.9% Net Margin

EPS (Diluted)

$-0.55

Total Assets

$2.83B

Cash & Equivalents

$405.53M

Free Cash Flow

$6.52M

Financial Statements
Beta
Revenue$373.66M
R&D Expenses$161.89M
Operating Expenses$460.34M
Operating Income-$86.69M
Interest Expense$7.91M
Net Income-$107.81M
EPS (Basic)$-0.55
Shares Outstanding (Basic)197.22M

Key Highlights

  • 1Total revenues grew by 34% to $377.7 million for the three months ended July 31, 2016, and by 36% to $723.2 million for the six months ended July 31, 2016, compared to the prior year periods.
  • 2Subscription services revenue, a key driver of the business, increased by 37% to $306.2 million for the quarter and 38% to $586.2 million for the six months.
  • 3The company reported a net loss of $108.0 million for the quarter and $188.6 million for the six months, representing an increase in dollar terms compared to the prior year.
  • 4Operating expenses increased by 33% for the quarter and 35% for the six months, largely driven by increased employee-related costs due to higher headcount.
  • 5Workday maintained a strong liquidity position, with cash and cash equivalents and marketable securities totaling $2.1 billion as of July 31, 2016.
  • 6Non-GAAP operating margin showed improvement, moving from (0.3)% to 1.6% for the quarter and from (0.5)% to 2.3% for the six months, indicating progress towards profitability on a non-GAAP basis.
  • 7The company continued to invest heavily in product development and sales & marketing, with expenses increasing by 41% and 31% (33% for six months) respectively, reflecting a focus on long-term growth.

Frequently Asked Questions

Workday reported strong revenue growth. For the three months ended July 31, 2016, total revenues increased by 34% year-over-year to $377.7 million. For the six months ended July 31, 2016, total revenues grew by 36% to $723.2 million. Subscription services revenue, a key growth engine, increased by 37% and 38% for the respective periods.

No, Workday reported a net loss for both the three and six-month periods ended July 31, 2016. The net loss for the quarter was $108.0 million, and for the six months it was $188.6 million. While the dollar amount of the net loss increased compared to the prior year, the company showed improvement on a non-GAAP basis, with non-GAAP operating margins turning positive.

Operating expenses have increased in absolute terms, primarily driven by investments in growth. For the quarter, operating expenses rose by 33% to $464.6 million, and for the six months, they increased by 35% to $883.7 million. The primary driver for these increases is higher employee-related costs due to a significant increase in headcount, supporting the company's expansion and product development efforts. Significant investments are also being made in product development and sales & marketing.

Workday maintains a strong liquidity position. As of July 31, 2016, the company had cash and cash equivalents and marketable securities totaling $2.1 billion. This substantial amount provides flexibility for ongoing operations, investments in growth, and potential strategic initiatives.