Press Release

Workday Announces Fiscal 2023 Fourth Quarter and Full Year Financial Results

Fiscal Fourth Quarter Total Revenues of $1.65 Billion, Up 19.6% Year Over Year
Subscription Revenues of $1.50 Billion, Up 21.7% Year Over Year
24-Month Subscription Revenue Backlog of $9.68 Billion, Up 21.3% Year Over Year
Total Subscription Revenue Backlog of $16.45 Billion, Up 28.4% Year Over Year

Fiscal Year 2023 Total Revenues of $6.22 Billion, Up 21.0% Year Over Year
Subscription Revenues of $5.57 Billion, Up 22.5% Year Over Year
Operating Cash Flows of $1.66 Billion, Up 0.4% Year Over Year

PLEASANTON, Calif.Feb. 27, 2023 /PRNewswire/ -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2023 fourth quarter and full year ended January 31, 2023.

Fiscal 2023 Fourth Quarter Results

  • Total revenues were $1.65 billion, an increase of 19.6% from the fourth quarter of fiscal 2022. Subscription revenues were $1.50 billion, an increase of 21.7% from the same period last year.
  • Operating loss was $89.0 million, or negative 5.4% of revenues, compared to an operating loss of $101.0 million, or negative 7.3% of revenues, in the same period last year. Non-GAAP operating income for the fourth quarter was $305.3 million, or 18.5% of revenues, compared to a non-GAAP operating income of $237.1 million, or 17.2% of revenues, in the same period last year.1
  • Basic and diluted net loss per share was $0.49, compared to basic and diluted net loss per share of $0.29 in the fourth quarter of fiscal 2022. Non-GAAP basic and diluted net income per share was $1.00 and $0.99, respectively, compared to non-GAAP basic and diluted net income per share of $0.82 and $0.78, respectively, in the same period last year.2

Fiscal Year 2023 Results

  • Total revenues were $6.22 billion, an increase of 21.0% from fiscal 2022. Subscription revenues were $5.57 billion, an increase of 22.5% from the prior year.
  • Operating loss was $222.2 million, or negative 3.6% of revenues, compared to an operating loss of $116.5 million, or negative 2.3% of revenues, in fiscal 2022. Non-GAAP operating income was $1.21 billion, or 19.5% of revenues, compared to a non-GAAP operating income of $1.15 billion, or 22.4% of revenues, in the prior year.1
  • Basic and diluted net loss per share was $1.44, compared to basic and diluted net income per share of $0.12 in fiscal 2022. Non-GAAP basic and diluted net income per share was $3.73 and $3.64, respectively, compared to non-GAAP basic and diluted net income per share of $4.20 and $3.99, respectively, in the prior year.2
  • Operating cash flows were $1.66 billion compared to $1.65 billion in the prior year.
  • Cash, cash equivalents, and marketable securities were $6.12 billion as of January 31, 2023.

Comments on the News

"We closed our fiscal year with another solid quarter, further reinforcing the strength of our value proposition as more organizations continue to select Workday to help manage their people and finances," said Aneel Bhusri, co-founder, co-CEO, and chair, Workday. "Despite the unpredictable environment, we remain well-positioned to drive the future of work for our more than 10,000 customers thanks to our amazing employees and unique approach to embedding artificial intelligence and machine learning into the very core of our platform."

"We have a clear strategy in place heading into fiscal 2024, and our land opportunity with net new finance and HR customers is wide open as we continue to gain ground with both large and medium-sized enterprises across the globe," said Carl Eschenbach, co-CEO, Workday. "We are doubling down in strategic growth areas by investing in our customer base, focusing on key industries, evolving and investing in our partner ecosystem, and relentlessly focusing on innovation. I am excited for the year ahead as we work together to execute on Workday's path to becoming one of the largest and most profitable software companies in the world."

"Our solid fourth quarter and full-year fiscal 2023 results underscore the durable demand for our solutions, as organizations of all sizes continue to prioritize finance and HR modernization," said Barbara Larson, chief financial officer, Workday. "We are maintaining the midpoint of our preliminary fiscal year 2024 subscription revenue guidance while increasing our fiscal 2024 non-GAAP operating margin outlook to the high end. We now expect subscription revenue of $6.525 billion to $6.575 billion, growth of 17% to 18%, and non-GAAP operating margin of 23.0%, which includes a 150 basis point increase resulting from a change in our useful life policy for servers and network equipment. Our outlook reflects our strong fourth quarter execution and the scale of our model, balanced with our expectation that the environment will remain uncertain in the near-term."1

Recent Highlights

  • Workday announced the appointment of Carl Eschenbach to co-CEO to serve alongside Aneel Bhusri through January 2024, at which time Carl is expected to assume sole CEO responsibilities and Aneel will assume a full-time role as executive chair and will remain as chair of the Board of Directors.
  • Workday appointed Sayan Chakraborty to co-president, Robynne Sisco to vice chair, and elected Mark Hawkins as an independent director of its Board of Directors.
  • Workday now serves the financial management and HR needs of more than 10,000 customers globally, which includes over 50% of the Fortune 500 and more than 25% of the Global 2000.
  • Workday's continued industry focus continues to pay off with growing momentum within the retail industry, with more than 50% of the retail organizations in the Fortune 500 having selected Workday, and able to benefit from the newly introduced AI and ML-based demand forecasting, which helps drive greater accuracy and cost effectiveness in the retail space.
  • Workday announced a $250 million expansion of its Workday Ventures fund to power innovation in AI and ML.
  • Workday released its first-ever commercial at the Big Game on Sunday, February 12, focused on what it means to be a "rock star" in the workplace.
  • Workday was listed on JUST Capital's 2023 JUST 100, which ranks America's largest publicly traded companies on the most important issues as determined by the American public, including the environment, how companies treat employees and customers, and how they support their communities.

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2023 fourth quarter and full year financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

Workday uses the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

1  Non-GAAP operating income and non-GAAP operating margin exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization expense for acquisition-related intangible assets. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

2  Non-GAAP net income per share excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

About Workday

Workday is a leading provider of enterprise cloud applications for finance and human resources, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics are built with artificial intelligence and machine learning at the core to help organizations around the world embrace the future of work. Workday is used by more than 10,000 organizations around the world and across industries – from medium-sized businesses to more than 50% of the Fortune 500. For more information about Workday, visit workday.com.

© 2023 Workday, Inc. All rights reserved. Workday and the Workday logo are registered trademarks of Workday, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to Workday's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures." The Company has not provided a reconciliation of its forward outlook for non-GAAP operating margin with its forward-looking GAAP operating margin in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to quantify share-based compensation expense, which is excluded from our non-GAAP operating margin, as it requires additional inputs such as the number of shares granted and market prices that are not ascertainable.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding the timing and impact of Workday's future leadership structure, Workday's full-year fiscal 2024 subscription revenues and non-GAAP operating margin, growth, innovation, opportunities, demand, strategy, and investments. These forward-looking statements are based only on currently available information and our current beliefs, expectations, and assumptions. Because forward-looking statements relate to the future, they are subject to risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control. If the risks materialize, assumptions prove incorrect, or we experience unexpected changes in circumstances, actual results could differ materially from the results implied by these forward-looking statements, and therefore you should not rely on any forward-looking statements. Risks include, but are not limited to: (i) breaches in our security measures or those of our third-party providers, unauthorized access to our customers' or other users' personal data, or disruptions in our data center or computing infrastructure operations; (ii) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (iii) the impact of recent macroeconomic events, including inflation and rising interest rates, on our business, as well as our customers, prospects, partners, and service providers; (iv) our ability to manage our growth effectively; (v) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (vi) the development of the market for enterprise cloud applications and services; (vii) acceptance of our applications and services by customers and individuals, including any new features, enhancements, and modifications, as well as the acceptance of any underlying technology such as machine learning and artificial intelligence; (viii) our ability to implement our plans, objectives, and other expectations with respect to any of our acquired companies; (ix) adverse changes in general economic or market conditions; (x) the regulatory, economic, and political risks associated with our domestic and international operations; (xi) the regulatory risks related to new and evolving technologies such as machine learning and artificial intelligence; (xii) delays or reductions in information technology spending; and (xiii) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on these and additional risks that could affect Workday's results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Form 10-K for the fiscal year ended January 31, 2023, and other reports that we have filed and will file with the SEC from time to time, which could cause actual results to vary from expectations. Workday assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

Any unreleased services, features, or functions referenced in this document, our website, or other press releases or public statements that are not currently available are subject to change at Workday's discretion and may not be delivered as planned or at all. Customers who purchase Workday services should make their purchase decisions based upon services, features, and functions that are currently available.

 

Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 
 

January 31, 2023

 

January 31, 2022

Assets

     

Current assets:

     

Cash and cash equivalents

$      1,886,311

 

$      1,534,273

Marketable securities

4,235,083

 

2,109,888

Trade and other receivables, net

1,570,086

 

1,242,545

Deferred costs

191,054

 

152,957

Prepaid expenses and other current assets

225,690

 

174,402

Total current assets

8,108,224

 

5,214,065

Property and equipment, net

1,201,254

 

1,123,075

Operating lease right-of-use assets

249,278

 

247,808

Deferred costs, noncurrent

420,988

 

341,259

Acquisition-related intangible assets, net

305,465

 

391,002

Goodwill

2,840,044

 

2,840,044

Other assets

360,985

 

341,252

Total assets

$    13,486,238

 

$    10,498,505

Liabilities and stockholders' equity

     

Current liabilities:

     

Accounts payable

$         153,751

 

$           55,487

Accrued expenses and other current liabilities

260,131

 

195,590

Accrued compensation

563,548

 

402,885

Unearned revenue

3,559,393

 

3,110,947

Operating lease liabilities

91,343

 

80,503

Debt, current

 

1,222,443

Total current liabilities

4,628,166

 

5,067,855

Debt, noncurrent

2,975,934

 

617,354

Unearned revenue, noncurrent

74,540

 

71,533

Operating lease liabilities, noncurrent

181,799

 

182,456

Other liabilities

40,231

 

24,225

Total liabilities

7,900,670

 

5,963,423

Stockholders' equity:

     

Common stock

259

 

251

Additional paid-in capital

8,828,639

 

7,284,174

Treasury stock

(185,047)

 

(12,467)

Accumulated other comprehensive income (loss)

53,051

 

7,709

Accumulated deficit

(3,111,334)

 

(2,744,585)

Total stockholders' equity

5,585,568

 

4,535,082

Total liabilities and stockholders' equity

$    13,486,238

 

$    10,498,505

 

Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

 
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2023

 

2022

 

2023

 

2022

Revenues:

             

Subscription services

$       1,495,402

 

$       1,229,173

 

$       5,567,206

 

$       4,546,313

Professional services

150,858

 

146,968

 

648,612

 

592,485

Total revenues

1,646,260

 

1,376,141

 

6,215,818

 

5,138,798

Costs and expenses (1):

             

Costs of subscription services

274,146

 

220,208

 

1,011,447

 

795,854

Costs of professional services

179,333

 

169,589

 

703,731

 

632,241

Product development

615,589

 

537,738

 

2,270,660

 

1,879,220

Sales and marketing

489,895

 

410,947

 

1,848,093

 

1,461,921

General and administrative

176,255

 

138,621

 

604,087

 

486,012

Total costs and expenses

1,735,218

 

1,477,103

 

6,438,018

 

5,255,248

Operating income (loss)

(88,958)

 

(100,962)

 

(222,200)

 

(116,450)

Other income (expense), net

11,039

 

17,141

 

(37,750)

 

132,632

Income (loss) before provision for (benefit from) income taxes

(77,919)

 

(83,821)

 

(259,950)

 

16,182

Provision for (benefit from) income taxes

47,778

 

(10,568)

 

106,799

 

(13,191)

Net income (loss)

$       (125,697)

 

$         (73,253)

 

$       (366,749)

 

$           29,373

Net income (loss) per share, basic

$              (0.49)

 

$              (0.29)

 

$              (1.44)

 

$                0.12

Net income (loss) per share, diluted

$              (0.49)

 

$              (0.29)

 

$              (1.44)

 

$                0.12

Weighted-average shares used to compute net income (loss) per share, basic

257,322

 

250,043

 

254,819

 

247,249

Weighted-average shares used to compute net income (loss) per share, diluted

257,322

 

250,043

 

254,819

 

254,032

         

(1) Costs and expenses include share-based compensation expenses as follows:

       
         
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2023

 

2022

 

2023

 

2022

Costs of subscription services

$           29,201

 

$           23,235

 

$         106,119

 

$           85,713

Costs of professional services

30,217

 

30,112

 

110,216

 

113,443

Product development

169,209

 

147,790

 

618,973

 

543,135

Sales and marketing

69,015

 

57,571

 

249,248

 

215,692

General and administrative

63,271

 

43,225

 

210,066

 

154,422

Total share-based compensation expenses

$         360,913

 

$         301,933

 

$      1,294,622

 

$      1,112,405

 

Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2023

 

2022

 

2023

 

2022

Cash flows from operating activities:

             

Net income (loss)

$         (125,697)

 

$           (73,253)

 

$         (366,749)

 

$             29,373

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

             

Depreciation and amortization

89,962

 

88,750

 

364,357

 

343,723

Share-based compensation expenses

360,913

 

292,235

 

1,294,622

 

1,100,584

Amortization of deferred costs

48,096

 

37,953

 

174,611

 

138,797

Amortization and writeoff of debt discount and issuance costs

955

 

997

 

6,955

 

3,988

Non-cash lease expense

23,432

 

21,529

 

91,750

 

86,235

(Gains) losses on investments

10,034

 

(20,366)

 

30,780

 

(145,845)

Other

3,272

 

(6,997)

 

12,645

 

(14,213)

Changes in operating assets and liabilities, net of business combinations:

             

Trade and other receivables, net

(518,608)

 

(379,190)

 

(318,600)

 

(207,933)

Deferred costs

(129,414)

 

(108,695)

 

(292,437)

 

(238,453)

Prepaid expenses and other assets

17,377

 

(14,106)

 

(14,070)

 

(35,153)

Accounts payable

64,889

 

13,531

 

85,773

 

9,414

Accrued expenses and other liabilities

94,712

 

74,780

 

135,965

 

50,671

Unearned revenue

754,529

 

687,981

 

451,593

 

529,516

Net cash provided by (used in) operating activities

694,452

 

615,149

 

1,657,195

 

1,650,704

Cash flows from investing activities:

             

Purchases of marketable securities

(1,531,956)

 

(541,689)

 

(7,182,961)

 

(2,858,729)

Maturities of marketable securities

1,181,324

 

500,625

 

4,948,833

 

2,804,103

Sales of marketable securities

50,969

 

171,730

 

104,324

 

199,016

Owned real estate projects

(3,790)

 

(3)

 

(4,236)

 

(171,501)

Capital expenditures, excluding owned real estate projects

(73,539)

 

(73,355)

 

(359,552)

 

(264,267)

Business combinations, net of cash acquired

 

(450,334)

 

 

(1,190,199)

Purchase of other intangible assets

 

(8,007)

 

(700)

 

(8,007)

Purchases of non-marketable equity and other investments

(3,000)

 

(38,485)

 

(23,173)

 

(123,011)

Sales and maturities of non-marketable equity and other investments

(135)

 

 

11,539

 

5,169

Other

 

(1)

 

 

Net cash provided by (used in) investing activities

(380,127)

 

(439,519)

 

(2,505,926)

 

(1,607,426)

Cash flows from financing activities:

             

Proceeds from issuance of debt, net of debt discount

 

 

2,978,077

 

Repayments and extinguishment of debt

 

(9,409)

 

(1,843,605)

 

(37,614)

Payments for debt issuance costs

 

 

(7,220)

 

Repurchases of common stock

(74,666)

 

 

(74,666)

 

Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld

66,972

 

71,947

 

151,974

 

148,328

Other

(201)

 

(54)

 

(739)

 

(463)

Net cash provided by (used in) financing activities

(7,895)

 

62,484

 

1,203,821

 

110,251

Effect of exchange rate changes

1,155

 

(620)

 

(595)

 

(705)

Net increase (decrease) in cash, cash equivalents, and restricted cash

307,585

 

237,494

 

354,495

 

152,824

Cash, cash equivalents, and restricted cash at the beginning of period

1,587,655

 

1,303,251

 

1,540,745

 

1,387,921

Cash, cash equivalents, and restricted cash at the end of period

$        1,895,240

 

$        1,540,745

 

$        1,895,240

 

$        1,540,745

 

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended January 31, 2023
(in thousands, except percentages and per share data)
(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$   274,146

 

$   (29,201)

 

$   (14,747)

 

$            —

 

$  230,198

Costs of professional services

179,333

 

(30,217)

 

(1,381)

 

 

147,735

Product development

615,589

 

(169,209)

 

(6,016)

 

 

440,364

Sales and marketing

489,895

 

(69,015)

 

(9,850)

 

 

411,030

General and administrative

176,255

 

(63,271)

 

(1,343)

 

 

111,641

Operating income (loss)

(88,958)

 

360,913

 

33,337

 

 

305,292

Operating margin

(5.4) %

 

21.9 %

 

2.0 %

 

— %

 

18.5 %

Other income (expense), net

11,039

 

 

 

 

11,039

Income (loss) before provision for (benefit from) income taxes

(77,919)

 

360,913

 

33,337

 

 

316,331

Provision for (benefit from) income taxes

47,778

 

 

 

12,325

 

60,103

Net income (loss)

$  (125,697)

 

$ 360,913

 

$   33,337

 

$   (12,325)

 

$  256,228

Net income (loss) per share, basic (1)

$        (0.49)

 

$        1.40

 

$        0.13

 

$       (0.04)

 

$         1.00

Net income (loss) per share, diluted (1)

$        (0.49)

 

$        1.40

 

$        0.13

 

$       (0.05)

 

$        0.99

   

(1)

GAAP net loss per share is calculated based upon 257,322 basic and diluted weighted-average shares of common stock. Non-GAAP

net income per share is calculated based upon 257,322 basic and 258,367 diluted weighted-average shares of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $21.2 million and employer payroll

tax-related items on employee stock transactions of $12.1 million.

(3)

We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency

across the reporting periods. For fiscal 2023, the non-GAAP tax rate was 19%.

 

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended January 31, 2022
(in thousands, except percentages and per share data)
(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$  220,208

 

$   (23,235)

 

$   (14,356)

 

$            —

 

$  182,617

Costs of professional services

169,589

 

(30,112)

 

(1,970)

 

 

137,507

Product development

537,738

 

(147,790)

 

(7,362)

 

 

382,586

Sales and marketing

410,947

 

(57,571)

 

(10,945)

 

 

342,431

General and administrative

138,621

 

(43,225)

 

(1,534)

 

 

93,862

Operating income (loss)

(100,962)

 

301,933

 

36,167

 

 

237,138

Operating margin

(7.3) %

 

21.9 %

 

2.6 %

 

— %

 

17.2 %

Other income (expense), net

17,141

 

 

 

 

17,141

Income (loss) before provision for (benefit from) income taxes

(83,821)

 

301,933

 

36,167

 

 

254,279

Provision for (benefit from) income taxes

(10,568)

 

 

 

58,881

 

48,313

Net income (loss)

$  (73,253)

 

$ 301,933

 

$    36,167

 

$  (58,881)

 

$ 205,966

Net income (loss) per share, basic (1)

$      (0.29)

 

$        1.21

 

$        0.14

 

$      (0.24)

 

$        0.82

Net income (loss) per share, diluted (1)

$      (0.29)

 

$        1.21

 

$        0.14

 

$      (0.28)

 

$        0.78

   

(1)

GAAP net loss per share is calculated based upon 250,043 basic and diluted weighted-average shares of common stock.

Non-GAAP net income per share is calculated based upon 250,043 basic and 264,581 diluted weighted-average shares of common

stock. The numerator used to compute non-GAAP diluted net income per share was increased by $1.3 million for after-tax interest

expense on our convertible senior notes in accordance with the if-converted method.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $20.7 million and employer payroll

tax-related items on employee stock transactions of $15.5 million.

(3)

We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency

across the reporting periods. For fiscal 2022, the non-GAAP tax rate was 19%. Included in the per share amount is a dilution impact

of $0.04 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

 

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Year Ended January 31, 2023
(in thousands, except percentages and per share data)
(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$ 1,011,447

 

$   (106,119)

 

$   (59,769)

 

$            —

 

$   845,559

Costs of professional services

703,731

 

(110,216)

 

(6,678)

 

 

586,837

Product development

2,270,660

 

(618,973)

 

(23,162)

 

 

1,628,525

Sales and marketing

1,848,093

 

(249,248)

 

(42,490)

 

 

1,556,355

General and administrative

604,087

 

(210,066)

 

(5,115)

 

 

388,906

Operating income (loss)

(222,200)

 

1,294,622

 

137,214

 

 

1,209,636

Operating margin

(3.6) %

 

20.8 %

 

2.3 %

 

— %

 

19.5 %

Other income (expense), net

(37,750)

 

 

 

 

(37,750)

Income (loss) before provision for (benefit from) income taxes

(259,950)

 

1,294,622

 

137,214

 

 

1,171,886

Provision for (benefit from) income taxes

106,799

 

 

 

115,859

 

222,658

Net income (loss)

$  (366,749)

 

$1,294,622

 

$   137,214

 

$  (115,859)

 

$   949,228

Net income (loss) per share, basic (1)

$        (1.44)

 

$         5.08

 

$        0.54

 

$        (0.45)

 

$          3.73

Net income (loss) per share, diluted (1)

$        (1.44)

 

$         5.08

 

$        0.54

 

$        (0.54)

 

$         3.64

   

(1)

GAAP net loss per share is calculated based upon 254,819 basic and diluted weighted-average shares of common stock.

Non-GAAP net income per share is calculated based upon 254,819 basic and 261,641 diluted weighted-average shares of common

stock. The numerator used to compute non-GAAP diluted net income per share was increased by $3.5 million for after-tax interest

expense on our convertible senior notes in accordance with the if-converted method.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $85.5 million and employer payroll

tax-related items on employee stock transactions of $51.7 million.

(3)

We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency

across the reporting periods. For fiscal 2023, the non-GAAP tax rate was 19%. Included in the per share amount is a dilution impact

of $0.09 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

 

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Year Ended January 31, 2022
(in thousands, except percentages and per share data)
(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$  795,854

 

$     (85,713)

 

$   (54,551)

 

$            —

 

$    655,590

Costs of professional services

632,241

 

(113,443)

 

(11,181)

 

 

507,617

Product development

1,879,220

 

(543,135)

 

(32,935)

 

 

1,303,150

Sales and marketing

1,461,921

 

(215,692)

 

(47,457)

 

 

1,198,772

General and administrative

486,012

 

(154,422)

 

(7,625)

 

 

323,965

Operating income (loss)

(116,450)

 

1,112,405

 

153,749

 

 

1,149,704

Operating margin

(2.3) %

 

21.6 %

 

3.1 %

 

— %

 

22.4 %

Other income (expense), net

132,632

 

 

 

 

132,632

Income (loss) before provision for (benefit from) income taxes

16,182

 

1,112,405

 

153,749

 

 

1,282,336

Provision for (benefit from) income taxes

(13,191)

 

 

 

256,835

 

243,644

Net income (loss)

$    29,373

 

$ 1,112,405

 

$  153,749

 

$  (256,835)

 

$ 1,038,692

Net income (loss) per share, basic (1)

$        0.12

 

$          4.50

 

$        0.62

 

$        (1.04)

 

$          4.20

Net income (loss) per share, diluted (1)

$        0.12

 

$          4.38

 

$        0.61

 

$        (1.12)

 

$          3.99

   

(1)

GAAP net income per share is calculated based upon 247,249 basic and 254,032 diluted weighted-average shares of common stock.

Non-GAAP net income per share is calculated based upon 247,249 basic and 261,849 diluted weighted-average shares of common

stock. The numerator used to compute non-GAAP diluted net income per share was increased by $5.2 million for after-tax interest

expense on our convertible senior notes in accordance with the if-converted method.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $78.1 million and employer payroll tax-related

items on employee stock transactions of $75.6 million.

(3)

We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency

across the reporting periods. For fiscal 2022, the non-GAAP tax rate was 19%. Included in the per share amount is a dilution impact

of $0.11 from the conversion of GAAP diluted net income per share to non-GAAP diluted net income per share.

 

About Non-GAAP Financial Measures

To provide investors and others with additional information regarding Workday's results, we have disclosed the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, and non-GAAP net income (loss) per share. Workday has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Non-GAAP operating income (loss) and non-GAAP operating margin differ from GAAP in that they exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, and amortization expense for acquisition-related intangible assets. Non-GAAP net income (loss) per share differs from GAAP in that it excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, and income tax effects.

Workday's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate Workday's financial performance. Management believes these non-GAAP financial measures reflect Workday's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in Workday's business. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Workday's operating results and prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

Management believes excluding the following items from the GAAP Condensed Consolidated Statements of Operations is useful to investors and others in assessing Workday's operating performance due to the following factors:

  • Share-based compensation expenses. Although share-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude share-based compensation expenses to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. Share-based compensation expenses are determined using a number of factors, including our stock price, volatility, and forfeiture rates, that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses are not reflective of the value ultimately received by the grant recipients.
  • Other operating expenses. Other operating expenses includes employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus we do not believe it is reflective of ongoing operations. Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
  • Income tax effects. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of share-based compensation and related employer payroll taxes, amortization of acquisition-related intangible assets, and amortization of debt discount and issuance costs. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. For fiscal 2024 and 2023, we determined the projected non-GAAP tax rate to be 19%, which reflects currently available information, as well as other factors and assumptions. We will periodically re-evaluate this tax rate, as necessary, for significant events, based on our ongoing analysis of the 2017 U.S. Tax Cuts and Jobs Act, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

The use of non-GAAP operating income (loss), non-GAAP operating margin, and non-GAAP net income (loss) per share measures have certain limitations as they do not reflect all items of expense that affect Workday's operations. Workday compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review Workday's financial information in its entirety and not rely on a single financial measure.

 

For further information: Investor Relations Contact: Justin Furby, ir@workday.com; Media Contact: Sion Rogers, media@workday.com

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