10-QPeriod: Q1 FY2022

Workday, Inc. Quarterly Report for Q1 Ended Apr 30, 2021

Filed May 26, 2021For Securities:WDAY

Summary

Workday, Inc. reported total revenues of $1.175 billion for the three months ended April 30, 2021, a 15% increase year-over-year, primarily driven by a 17% increase in subscription services revenue to $1.032 billion. While total costs and expenses also increased, Workday significantly improved its operating loss from a loss of $144.5 million in Q1 FY2020 to a loss of $38.3 million in Q1 FY2021. This improvement is also reflected in the non-GAAP operating margin, which expanded from 12.8% to 24.6%, indicating enhanced operational efficiency. The company's balance sheet shows solid liquidity, with cash, cash equivalents, and marketable securities totaling $3.0 billion. A notable event during the quarter was the acquisition of Peakon for $702 million, aimed at enhancing Workday's employee success platform capabilities and contributing to the growth in goodwill. Despite incurring a net loss on a GAAP basis, the company demonstrates strong revenue growth and improving operational leverage, positioning it for continued expansion in the enterprise cloud applications market.

Financial Highlights

50 data points
Beta

Revenue

$1.18B

Net Income

-$46.52M

-4.0% Net Margin

EPS (Diluted)

$-0.19

Total Assets

$8.62B

Cash & Equivalents

$967.81M

Free Cash Flow

$452.43M

Financial Statements
Beta
Revenue$1.18B
R&D Expenses$441.62M
Operating Expenses$1.21B
Operating Income-$38.31M
Interest Expense$4.18M
Net Income-$46.52M
EPS (Basic)$-0.19
EPS (Diluted)$-0.19
Shares Outstanding (Basic)243.74M
Shares Outstanding (Diluted)243.74M

Key Highlights

  • 1Total revenues grew 15% year-over-year to $1.175 billion, driven by a strong 17% increase in subscription services revenue to $1.032 billion.
  • 2Operating loss significantly improved, narrowing from $144.5 million in the prior year period to $38.3 million in the current period.
  • 3Non-GAAP operating margin expanded substantially from 12.8% to 24.6%, highlighting improved operational efficiency and profitability.
  • 4The company maintained a strong liquidity position with $3.0 billion in cash, cash equivalents, and marketable securities as of April 30, 2021.
  • 5Workday completed the acquisition of Peakon for $702 million, aiming to enhance its employee success platform and contributing to a significant increase in goodwill on the balance sheet.
  • 6Deferred revenue remains substantial at $2.4 billion (current) and $65 million (non-current), indicating strong future revenue potential.
  • 7Cash flow from operations was robust at $452.4 million, a significant increase from $263.7 million in the prior year period.

Frequently Asked Questions

The primary driver of Workday's revenue growth is its subscription services, which increased by 17% to $1.032 billion in the first quarter of fiscal year 2022. This reflects continued strong demand for Workday's cloud-based enterprise applications.

The acquisition of Peakon for $702 million, completed in March 2021, contributed to a substantial increase in Goodwill ($542.5 million preliminary allocation) and Acquisition-related intangible assets on the balance sheet. While the financial results of Peakon were included from the acquisition date, the company stated that the effect of this acquisition was not material to its overall financial results for the reported period. The acquisition is expected to enhance Workday's employee success platform.

Workday continues to operate at a GAAP net loss, reporting a net loss of $46.5 million for the quarter. However, the company is focused on investing for growth and notes that its non-GAAP operating margin significantly improved to 24.6%. Management expects continued investment in product development, sales, and marketing, and anticipates that GAAP profitability may not be achieved in the near future, but sees long-term potential for economies of scale.

Workday maintains a strong liquidity position with $3.0 billion in cash, cash equivalents, and marketable securities. The company has a $750 million revolving credit facility available and is managing its debt, including convertible senior notes. The company expects its existing resources and operating cash flow to be sufficient for its needs over the next 12 months. The company is also actively managing its convertible senior notes, which were eligible for conversion by holders in the second quarter of fiscal 2022.