01—Abstract
Summary
Summary of the 8-K filed May 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Workday reported fiscal 2025 first-quarter results (quarter ended April 30, 2024) that showed solid top-line growth and margin expansion.
Total revenues were $1.990 billiona, up 18.1% year over year, and subscription revenues were $1.815 billion, up 18.8%. GAAP operating income swung to $64 million (3.2% margin) from a $20 million loss a year earlier, and GAAP diluted EPS was $0.40 versus $0.00. Non-GAAP operating margin expanded to 25.9% from 23.5%, and non-GAAP diluted EPS rose to $1.74 from $1.33.
Free cash flow was $291 millionb, up from $218 million. The 12-month subscription revenue backlog grew 17.9% to $6.60 billion, and total subscription backlog grew 24.2% to $20.68 billion. The most important investor takeaway is a mixed guidance update.
Management said subscription revenue guidance was updated to reflect elevated sales scrutiny and lower customer headcount growth during the quarter. The new full-year fiscal 2025 subscription revenue range is $7.700 to $7.725 billionc (about 17% growth), and fiscal Q2 subscription revenue is guided to $1.895 billion (about 17% growth). Management raised its non-GAAP operating margin outlook to 25.0% for the full year and guided 24.5% for Q2, reflecting an emphasis on efficiency.
The filing does not disclose the prior revenue guidance, so the size of any revenue reduction cannot be determined from this document. Other notable items include the completed acquisition of HiredScore, which added about $512 milliond of net cash outflow for business combinations and lifted goodwill to $3.26 billion from $2.85 billion. Cash, cash equivalents, and marketable securities totaled $7.18 billion.
Unearned revenue declined seasonally, from $4.13 billion to $3.61 billion. Workday also changed its non-GAAP definitions starting in fiscal 2025 to exclude certain acquisition-related costs, realignment costs, and gains or losses on strategic investments. Investors should keep this in mind when comparing non-GAAP figures across periods.
02—Key points
Key Highlights
- Revenue growth: Total revenues rose 18.1% to $1.990 billion, and subscription revenues rose 18.8% to $1.815 billion.
- Profitability: GAAP operating income reached $64 million (3.2% margin) versus a $20 million loss last year. Non-GAAP operating margin expanded to 25.9% from 23.5%.
- Guidance: Full-year fiscal 2025 subscription revenue was updated to $7.700–$7.725 billion (about 17% growth), citing elevated sales scrutiny and lower customer headcount growth. Non-GAAP operating margin guidance was raised to 25.0%.
- Second-quarter outlook: Subscription revenue is guided to $1.895 billion (about 17% growth) and non-GAAP operating margin to 24.5%.
- Backlog: 12-month subscription revenue backlog grew 17.9% to $6.60 billion, and total subscription backlog grew 24.2% to $20.68 billion.
- Cash and capital allocation: Free cash flow was $291 million (up from $218 million), and cash plus marketable securities totaled $7.18 billion. The company repurchased about 0.5 million Class A shares for $134 million.
- Acquisition and definition changes: The HiredScore acquisition closed (about $512 million net cash outflow), and non-GAAP definitions were revised starting fiscal 2025, which affects comparability.
03—Questions
Frequently Asked Questions
Why did Workday update its subscription revenue guidance?
CFO Zane Rowe said the update reflects elevated sales scrutiny and lower customer headcount growth experienced during the quarter. Management also said Q1 was in line with its expectations across key financial metrics. The filing does not state the prior guidance figures, so the magnitude of the change cannot be determined from this document.
Did profitability improve despite the revenue guidance update?
Yes. GAAP operating income turned positive at $64 million versus a $20 million loss a year earlier, and non-GAAP operating margin rose to 25.9% from 23.5%. Management raised its full-year non-GAAP operating margin outlook to 25.0%, citing efficiency efforts.
How strong is Workday's cash position and cash generation?
Operating cash flow was $372 million and free cash flow was $291 million, both up year over year. Cash, cash equivalents, and marketable securities totaled $7.18 billion as of April 30, 2024. Debt, noncurrent, was about $2.98 billion, so the company held a net cash position.
What did the HiredScore acquisition add to Workday?
Workday completed the HiredScore acquisition, which adds an AI-powered talent acquisition and internal mobility solution. Net cash paid for business combinations was $512 million, and goodwill increased to $3.26 billion from $2.85 billion. Acquisition-related intangibles rose to $351 million from $233 million.
Why might non-GAAP figures be less comparable going forward?
Beginning in fiscal 2025, Workday excludes certain acquisition-related costs, realignment costs, and gains or losses on strategic investments from non-GAAP results. Prior-period strategic investment amounts were recast, but investors should be aware of the definition change when comparing non-GAAP metrics with earlier filings or peers. Share-based compensation of $385 million (19.3% of revenue) remains a major excluded item.
04—Continue