10-QPeriod: Q1 FY2018

Workday, Inc. Quarterly Report for Q1 Ended Apr 30, 2017

Filed June 2, 2017For Securities:WDAY

Summary

Workday, Inc. (WDAY) reported its first-quarter fiscal year 2018 results (ending April 30, 2017), demonstrating robust revenue growth driven primarily by its subscription services. Total revenues increased by 38% year-over-year to $479.9 million, with subscription services revenue alone growing by 43% to $399.7 million. Despite this strong top-line performance, the company continued to operate at a net loss of $64.0 million, a slight improvement from the $78.5 million net loss in the same period last year. This loss is attributed to significant investments in product development and sales & marketing to fuel future growth. The company also highlighted an improvement in its non-GAAP operating margin, which expanded to 12.7% from 3.8% in the prior year period, indicating increasing operational efficiency as revenue scales. Workday maintained a strong liquidity position with $2.1 billion in cash, cash equivalents, and marketable securities. Cash flow from operations remained positive at $180.0 million, and the company also generated a healthy free cash flow of $149.4 million, demonstrating its ability to fund operations and growth initiatives internally. Investors should note the ongoing strategic investments in R&D and sales, which are expected to continue to weigh on GAAP profitability in the near term but are crucial for maintaining market leadership in the cloud enterprise software space.

Financial Highlights

40 data points
Beta

Revenue

$479.86M

Net Income

-$64.04M

-13.3% Net Margin

EPS (Diluted)

$-0.31

Total Assets

$3.31B

Cash & Equivalents

$501.10M

Free Cash Flow

$180.02M

Financial Statements
Beta
Revenue$479.86M
R&D Expenses$196.44M
Operating Expenses$540.06M
Operating Income-$60.20M
Interest Expense$6.99M
Net Income-$64.04M
EPS (Basic)$-0.31
Shares Outstanding (Basic)203.82M

Key Highlights

  • 1Total revenues grew 38% year-over-year to $479.9 million.
  • 2Subscription services revenue increased by 43% to $399.7 million, forming the core of the company's revenue base.
  • 3Net loss improved to $64.0 million from $78.5 million in the prior year period.
  • 4Non-GAAP operating margin significantly improved to 12.7% from 3.8% in the prior year period.
  • 5Operating expenses increased significantly due to investments in product development and sales & marketing, reflecting a growth-oriented strategy.
  • 6The company maintained a strong liquidity position with $2.1 billion in cash, cash equivalents, and marketable securities.
  • 7Free cash flow was robust at $149.4 million, indicating healthy cash generation from operations.

Frequently Asked Questions

Workday's primary growth driver is its Subscription Services revenue, which increased by 43% year-over-year to $399.7 million. This segment is a key indicator of the company's ability to attract and retain customers for its cloud-based financial management and human capital management applications.

No, Workday reported a net loss of $64.0 million for the three months ended April 30, 2017. However, this represents an improvement from the net loss of $78.5 million in the same period last year. The company is investing heavily in growth, which impacts short-term profitability.

Workday is increasing its operating expenses, particularly in product development and sales & marketing, to support its growth strategy. However, the company is also demonstrating improving operational leverage, as seen by the significant expansion in its non-GAAP operating margin to 12.7%. This suggests that as revenue grows, operating expenses are not increasing at the same rate, leading to better efficiency.

Workday maintains a strong financial position with $2.1 billion in cash, cash equivalents, and marketable securities as of April 30, 2017. The company generated $180.0 million in cash from operations and $149.4 million in free cash flow during the quarter, indicating a healthy ability to fund its operations and strategic investments.