10-QPeriod: Q2 FY2024

Workday, Inc. Quarterly Report for Q2 Ended Jul 31, 2023

Filed August 24, 2023For Securities:WDAY

Summary

Workday, Inc. reported solid revenue growth for the second quarter and first half of fiscal year 2024, driven by its core subscription services. Total revenues increased by 16% year-over-year for the quarter to $1.8 billion and by 17% for the first half to $3.5 billion. Subscription services revenue, which constitutes the vast majority of the company's income, saw a robust 19% increase in both periods. The company also demonstrated a significant improvement in profitability, with GAAP operating income turning positive to $36.3 million for the quarter, compared to a loss in the prior year, and Non-GAAP operating margin improving to 23.6% for the quarter. The company maintained strong customer retention rates, with gross and net retention above 95% and 100%, respectively. Despite macroeconomic uncertainties, Workday continues to invest in product development and sales and marketing, reflecting confidence in sustained growth. The company ended the period with a healthy cash position of $6.7 billion in cash, cash equivalents, and marketable securities, indicating strong liquidity.

Financial Highlights

52 data points
Beta

Revenue

$1.79B

Net Income

$79.00M

4.4% Net Margin

EPS (Diluted)

$0.30

Total Assets

$13.74B

Cash & Equivalents

$1.45B

Free Cash Flow

$360.00M

Financial Statements
Beta
Revenue$1.79B
R&D Expenses$610.00M
Operating Expenses$1.75B
Operating Income$36.00M
Interest Expense$29.00M
Net Income$79.00M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)261.19M
Shares Outstanding (Diluted)264.44M

Key Highlights

  • 1Total revenues grew 16% year-over-year to $1.8 billion for Q2 FY24 and 17% year-over-year to $3.5 billion for the first half of FY24.
  • 2Subscription services revenue, the primary revenue driver, increased by 19% year-over-year for both the quarter and the first half.
  • 3Significant improvement in profitability: GAAP operating income turned positive to $36.3 million for the quarter, and Non-GAAP operating margin improved to 23.6% for the quarter.
  • 4Strong customer retention: Gross and net retention rates remained above 95% and 100%, respectively.
  • 5Healthy liquidity with $6.7 billion in cash, cash equivalents, and marketable securities as of July 31, 2023.
  • 6Subscription revenue backlog increased by 32% year-over-year to $17.8 billion as of July 31, 2023.
  • 7Company continues strategic investments in product development and sales & marketing to drive future growth.

Frequently Asked Questions

Workday's primary source of revenue is subscription services, which accounted for approximately 91% of total revenues in the reported periods. Subscription services revenue demonstrated strong performance, increasing by 19% year-over-year for both the three and six months ended July 31, 2023.

Workday has shown significant improvement in profitability. For the three months ended July 31, 2023, GAAP operating income turned positive at $36.3 million, a substantial improvement from a loss in the prior year. The Non-GAAP operating margin also saw a notable increase, reaching 23.6% for the quarter compared to 19.6% in the prior year.

Workday has substantial unearned revenue, totaling $3.4 billion as of July 31, 2023, primarily from subscription contracts. The company recognized $1.3 billion of this unearned revenue as subscription services revenue during the quarter. The significant remaining performance obligations, amounting to $17.8 billion as of July 31, 2023, represent contracted future revenues and provide a strong indicator of future revenue visibility and growth.

Workday maintains a strong liquidity position with $6.7 billion in cash, cash equivalents, and marketable securities as of July 31, 2023. The company generated $425 million in cash from operating activities for the quarter, indicating healthy cash flow generation. They believe their current liquidity is sufficient to meet working capital and capital expenditure needs over the next 12 months.