10-QPeriod: Q1 FY2021

Workday, Inc. Quarterly Report for Q1 Ended Apr 30, 2020

Filed May 28, 2020For Securities:WDAY

Summary

Workday, Inc. (WDAY) reported its first quarter fiscal year 2021 results, with total revenues reaching $1.02 billion, a 23% increase year-over-year. Subscription services revenue, the primary driver of growth, increased by 26% to $882 million. Despite revenue growth, the company reported a net loss of $158.4 million for the quarter, a widening from the prior year's loss of $116.3 million. This loss was partly attributed to a one-time $79 million employee bonus related to the COVID-19 pandemic and increased employee-related costs due to higher headcount. Cash flow from operations remained strong, providing $263.7 million, demonstrating the recurring revenue model's resilience. The company also secured a new $750 million senior unsecured term loan facility and a $750 million revolving credit facility in April 2020, bolstering its liquidity. While revenue growth is positive, investors should monitor the company's path to profitability and its ability to manage operating expenses, especially in light of the ongoing economic uncertainties stemming from the COVID-19 pandemic.

Financial Highlights

47 data points
Beta

Revenue

$1.02B

Net Income

-$158.37M

-15.6% Net Margin

EPS (Diluted)

$-0.68

Total Assets

$7.23B

Cash & Equivalents

$1.22B

Free Cash Flow

$263.68M

Financial Statements
Beta
Revenue$1.02B
R&D Expenses$443.48M
Operating Expenses$1.16B
Operating Income-$144.46M
Interest Expense$17.54M
Net Income-$158.37M
EPS (Basic)$-0.68
EPS (Diluted)$-0.68
Shares Outstanding (Basic)232.94M
Shares Outstanding (Diluted)232.94M

Key Highlights

  • 1Total revenues increased by 23% to $1.02 billion for the three months ended April 30, 2020.
  • 2Subscription services revenue grew by 26% year-over-year to $882 million, indicating continued demand for Workday's core offerings.
  • 3The company reported a net loss of $158.4 million, a wider loss compared to $116.3 million in the prior year period, influenced by increased operating expenses and a one-time COVID-19 related bonus.
  • 4Cash flow from operating activities was positive at $263.7 million, demonstrating operational cash generation capabilities.
  • 5Workday secured a new $750 million term loan facility and a $750 million revolving credit facility in April 2020, enhancing its financial flexibility.
  • 6Remaining performance obligations for subscription contracts stood at approximately $8.19 billion as of April 30, 2020, providing visibility into future revenue.
  • 7The company noted a $79 million increase in operating expenses related to a one-time cash bonus paid to employees due to the COVID-19 pandemic.

Frequently Asked Questions

Workday reported total revenues of $1.02 billion for the three months ended April 30, 2020, representing a 23% increase compared to $825 million in the same period of the prior year. Subscription services revenue, a key growth driver, increased by 26% to $882 million.

No, Workday reported a net loss of $158.4 million for the three months ended April 30, 2020, which is a wider loss than the $116.3 million reported in the prior year period. The increased loss was influenced by higher operating expenses, including a one-time employee bonus related to COVID-19 and increased headcount.

The COVID-19 pandemic had a mixed impact. While it contributed to a $79 million increase in operating expenses due to a one-time employee bonus and potential future impacts on sales cycles, the company highlighted that its subscription-based model provides near-term revenue predictability. They noted an increase in delayed purchasing decisions and potential reductions in customer demand and spend, the full effects of which may not be reflected until future periods. Despite these challenges, Workday's revenue growth continued.

The company has approximately $8.19 billion in remaining performance obligations for subscription contracts as of April 30, 2020, with about $5.52 billion expected to be recognized within the next 24 months. This indicates a strong revenue visibility for the near to medium term, though the company acknowledged potential impacts on future bookings due to economic uncertainty.

Workday reported strong liquidity with $2.6 billion in cash, cash equivalents, and marketable securities as of April 30, 2020. Additionally, in April 2020, the company secured a $750 million term loan and a $750 million revolving credit facility, significantly enhancing its financial flexibility to manage its operations and upcoming debt maturities, such as the $250 million in convertible notes due in July 2020.