10-QPeriod: Q3 FY2021

Workday, Inc. Quarterly Report for Q3 Ended Oct 31, 2020

Filed November 20, 2020For Securities:WDAY

Summary

Workday, Inc.'s third-quarter fiscal year 2021 filing (period ending October 31, 2020) reveals continued strong revenue growth driven by its subscription services, which now constitute the vast majority of its top line. Total revenues increased by 18% year-over-year for the quarter. While the company reported a net loss, a significant improvement was observed compared to the prior year's period, indicating progress towards profitability. The company maintained a robust liquidity position with substantial cash, cash equivalents, and marketable securities. Key operational highlights include consistent growth in subscription services revenue, which benefited from an increased number of customer contracts. Despite some headwinds from the COVID-19 pandemic, such as a slight decrease in professional services revenue, the company demonstrated resilience. Management's focus remains on disciplined investment for long-term growth, particularly in product development and global expansion, while navigating the economic uncertainties posed by the pandemic. The company also proactively managed its debt obligations, including the reclassification of its 2022 Notes to current liabilities due to meeting early conversion criteria.

Financial Highlights

48 data points
Beta

Revenue

$1.11B

Net Income

-$24.34M

-2.2% Net Margin

EPS (Diluted)

$-0.10

Total Assets

$7.85B

Cash & Equivalents

$1.07B

Free Cash Flow

$293.80M

Financial Statements
Beta
Revenue$1.11B
R&D Expenses$419.96M
Operating Expenses$1.12B
Operating Income-$14.08M
Interest Expense$16.37M
Net Income-$24.34M
EPS (Basic)$-0.10
EPS (Diluted)$-0.10
Shares Outstanding (Basic)238.06M
Shares Outstanding (Diluted)238.06M

Key Highlights

  • 1Total revenues increased by 18% year-over-year to $1.11 billion for the three months ended October 31, 2020.
  • 2Subscription services revenue grew by 21% year-over-year to $969 million, driven by an increased customer base.
  • 3The company reported a net loss of $24.3 million for the quarter, a significant improvement from a net loss of $115.7 million in the prior year's comparable period.
  • 4Workday maintained a strong liquidity position with $2.9 billion in cash, cash equivalents, and marketable securities as of October 31, 2020.
  • 5Operating expenses increased by 7% year-over-year for the quarter, with significant investments in employee-related expenses due to headcount growth.
  • 6Non-GAAP operating margins showed improvement, reaching 24.2% for the quarter, up from 15.2% in the prior year's comparable period.
  • 7The 2022 Convertible Senior Notes were reclassified to current liabilities as they met the criteria for conversion by holders in the fourth quarter of fiscal 2021.

Frequently Asked Questions

Workday reported total revenues of $1.11 billion for the three months ended October 31, 2020, an increase of 18% compared to $938 million in the prior year period. Subscription services revenue, the primary driver of growth, increased by 21% to $969 million, attributed to an expanding customer base.

No, Workday reported a net loss of $24.3 million for the three months ended October 31, 2020. However, this represents a significant improvement from the net loss of $115.7 million reported in the same period last year, indicating progress towards profitability.

Workday maintained a strong liquidity position with $2.9 billion in cash, cash equivalents, and marketable securities as of October 31, 2020. The company also has access to a $750 million revolving credit facility and had $739 million outstanding under its term loan facility. Importantly, its 0.25% convertible senior notes due 2022 met the criteria for conversion by holders, leading to their reclassification as current liabilities.

The COVID-19 pandemic had a mixed impact. While it led to a slight decrease in professional services revenue due to reduced training, it also favorably impacted operating margins through moderation of certain expenses like travel. The company noted that demand for its products remained strong, and near-term revenues are predictable due to its subscription model, but acknowledged potential future impacts on new business and renewals if economic uncertainty persists.