10-QPeriod: Q2 FY2022

Workday, Inc. Quarterly Report for Q2 Ended Jul 31, 2021

Filed August 26, 2021For Securities:WDAY

Summary

Workday, Inc. reported solid revenue growth for the second quarter and first half of fiscal year 2022, with total revenues increasing by 19% and 17% respectively, driven primarily by subscription services. The company demonstrated a significant improvement in profitability, moving from a net loss in the prior year to a net income of $105.7 million for the quarter and $59.2 million for the first half. This turnaround is supported by increased revenue and a favorable impact from expense moderation related to the COVID-19 pandemic, though the company emphasizes that the extent of this favorable impact is not expected to continue long-term. Key financial highlights include continued strong subscription revenue growth, which constitutes the majority of the company's revenue. While operating expenses increased in absolute terms, they grew at a slower pace than revenue in the first half of the year, contributing to improved operating margins on a non-GAAP basis. The company's liquidity remains strong, with a significant balance of cash, cash equivalents, and marketable securities. Despite the positive financial performance, Workday continues to invest heavily in product development and sales and marketing to fuel future growth, acknowledging that these investments will increase absolute costs in the near term.

Financial Highlights

50 data points
Beta

Revenue

$1.26B

Net Income

$105.74M

8.4% Net Margin

EPS (Diluted)

$0.41

Total Assets

$9.11B

Cash & Equivalents

$1.09B

Free Cash Flow

$198.47M

Financial Statements
Beta
Revenue$1.26B
R&D Expenses$444.25M
Operating Expenses$1.26B
Operating Income-$1.12M
Interest Expense$4.19M
Net Income$105.74M
EPS (Basic)$0.43
EPS (Diluted)$0.41
Shares Outstanding (Basic)246.94M
Shares Outstanding (Diluted)260.02M

Key Highlights

  • 1Total revenues increased by 19% to $1.26 billion for the three months ended July 31, 2021, and by 17% to $2.44 billion for the six months ended July 31, 2021.
  • 2Subscription services revenue, the primary revenue driver, grew by 20% to $1.11 billion for the quarter and 18% to $2.15 billion for the first half.
  • 3Workday achieved profitability, reporting a net income of $105.7 million for the quarter, a significant improvement from a net loss of $28.0 million in the prior year period.
  • 4Non-GAAP operating margins improved significantly for the first half of the year, reaching 23.8% compared to 18.7% in the prior year, driven by revenue growth outpacing expense increases.
  • 5The company's cash, cash equivalents, and marketable securities totaled $3.3 billion as of July 31, 2021, indicating strong liquidity.
  • 6Acquisition of Peakon ApS for $702 million was completed on March 9, 2021, adding an employee success platform to Workday's offerings.
  • 7Deferred revenue remains substantial at $2.45 billion for the current quarter, indicating a strong future revenue pipeline from subscription contracts.

Frequently Asked Questions

For the three months ended July 31, 2021, Workday reported total revenues of $1.26 billion, a 19% increase year-over-year. Subscription services revenue, a key growth driver, increased by 20% to $1.11 billion. For the six months ended July 31, 2021, total revenues were $2.44 billion, up 17% year-over-year, with subscription services revenue growing 18% to $2.15 billion.

Workday demonstrated a significant improvement in profitability. For the three months ended July 31, 2021, the company reported a net income of $105.7 million, a substantial turnaround from a net loss of $28.0 million in the same period last year. For the six months ended July 31, 2021, Workday reported a net income of $59.2 million, compared to a net loss of $186.4 million in the prior year period.

Workday plans to continue reinvesting a significant portion of its revenues into product development and sales and marketing to drive future growth and expand globally. While this will increase absolute costs in the near term, the company anticipates these expenses as a percentage of total revenues will decrease over the longer term as revenues grow and economies of scale are realized. The company also completed the acquisition of Peakon ApS for $702 million, which adds to current investments.

As of July 31, 2021, Workday had total debt of approximately $1.86 billion. This includes a Term Loan and convertible senior notes. The company's Credit Agreement includes covenants such as a maximum leverage ratio, and Workday was in compliance with these covenants as of the reporting date. The convertible senior notes due in October 2022 are convertible at the option of holders, and the company noted that conversions to date have been immaterial.