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 Workday Announces Fiscal 2016 First Quarter Financial Results
   Tuesday, May 26, 2015 4:02:12 PM ET

Workday, Inc. (WDAY ), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal first quarter ended April 30, 2015.

--  Total revenues were $251.0 million, an increase of 57% from the first
    quarter of fiscal 2015. Subscription revenues were $201.0 million, an
    increase of 63% from same period last year.


--  Operating loss was $53.4 million, or negative 21.3% of revenues,
    compared to an operating loss of $52.1 million, or negative 32.6% of
    revenues, in the same period last year. Non-GAAP operating loss for
    the first quarter was $2.1 million, or negative 0.8% of revenues,
    compared to a non-GAAP operating loss of $22.5 million last year, or
    negative 14.1% of revenues.(1)


--  Net loss per basic and diluted share was $0.33, compared to a net loss
    per basic and diluted share of $0.32 in the first quarter of fiscal
    2015. The non-GAAP net loss per basic and diluted share for the first
    quarter was $0.02, compared to a non-GAAP net loss per basic and
    diluted share of $0.13 during the same period last year.(1)


--  Operating cash flows for the first quarter were $94.1 million and free
    cash flows were $63.9 million. For the trailing twelve months,
    operating cash flows were $174.4 million and free cash flows were
    $50.4 million.(2)


--  Cash, cash equivalents and marketable securities were approximately
    $1.9 billion as of April 30, 2015. Unearned revenues were $653.4
    million, a 41% increase from last year.



"We had a strong first quarter and welcomed a record number of new customers to the Workday community," said Aneel Bhusri, co-founder and CEO, Workday. "We delivered Workday Talent Insights, the first Workday Insight Application from our new product suite that’s starting the next era of enterprise applications. We also announced the availability of Workday Professional Services Automation and Workday Payroll for the UK, continuing our focus on rapid innovation to help our customers grow their businesses."

"We are very pleased with our solid first quarter results," said Mark Peek, chief financial officer, Workday. "We generated record quarterly revenues and trailing twelve month operating cash flows. Looking ahead, we anticipate second quarter total revenues to be within a range of $270 and $274 million, or growth of 45% to 47% as compared to the prior year."

Recent Highlights

--  In its latest feature release, Workday 24, Workday announced the
    general availability of Workday Talent Insights, the first application
    available as part of Workday Insight Applications. Workday Talent
    Insights helps customers address talent-related challenges such as
    identifying a top performer at risk of leaving the company or
    pinpointing issues with hiring initiatives that could impact business
    performance.


--  Additionally, in Workday 24, Workday announced the general
    availability of Workday Professional Services Automation (PSA).
    Blending Workday Financial Management and Workday Human Capital
    Management (HCM) functionality, Workday PSA sets a new standard in
    professional services automation for organizations that manage
    client-facing billable projects.


--  The company also announced the general availability of Workday Payroll
    for the UK as part of Workday 24 and increased momentum for the
    Workday Global Payroll Cloud partner program. Partners in 85 countries
    are now certified to deliver integrations between Workday HCM and
    other payroll systems to provide customers with a comprehensive view
    of global payroll data.


--  Workday was named one of the 100 Best Companies to Work For by Fortune
    magazine, ranking #22 in its inaugural appearance on the list. Workday
    also ranked #1 for the largest companies by the San Francisco Business
    Times and the Silicon Valley / San Jose Business Journal on the annual
    list of Best Places to Work in the Bay Area.



Workday plans to host a conference call today to review its first quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed via webcast or through the company’s Investor Relations website at www.workday.com/investorrelations. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 45 days.

(1)Non-GAAP operating loss and net loss per share for the fiscal first quarters of 2016 and 2015 exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets and debt discount and issuance costs associated with convertible notes. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

(2)Free cash flows are defined as operating cash flows minus purchased property and equipment, property and equipment acquired under capital leases and purchased other intangible assets. 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. Founded in 2005, Workday delivers financial management, human capital management, and analytics applications designed for the world’s largest companies, educational institutions, and government agencies. Hundreds of organizations, ranging from medium-sized businesses to Fortune 50 enterprises, have selected Workday.

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."

Forward-Looking Statements This press release contains forward-looking statements including, among other things, statements regarding Workday’s second quarter revenue projections. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) breaches in our security measures, unauthorized access to our customers’ data or disruptions in our data center operations; (ii) our ability to manage our growth effectively; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors; (iv) the development of the market for enterprise cloud services; (v) acceptance of our applications and services by customers; (vi) adverse changes in general economic or market conditions; (vii) delays or reductions in information technology spending; (viii) our limited operating history, which makes it difficult to predict future results; and (ix) changes in sales may not be immediately reflected in our results due to our subscription model. Further information on 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 year ended January 31, 2015 and our future reports that we may 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.

Copyright 2015. 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.


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

                                                April 30,      January 31,
                                                   2015          2015(1)
                                              -------------   -------------
Assets
Current assets:
  Cash and cash equivalents                   $     270,484   $     298,192
  Marketable securities                           1,651,051       1,559,517
  Accounts receivable, net                          128,493         188,357
  Deferred costs                                     20,364          20,471
  Prepaid expenses and other current assets          50,601          42,502
                                              -------------   -------------
Total current assets                              2,120,993       2,109,039
Property and equipment, net                         154,537         140,136
Deferred costs, noncurrent                           19,981          20,998
Goodwill and acquisition-related intangible
 assets, net                                         34,479          34,779
Other assets                                         52,571          53,681
                                              -------------   -------------
Total assets                                  $   2,382,561   $   2,358,633
                                              =============   =============
Liabilities and stockholders’ equity
Current liabilities:
  Accounts payable                            $      13,320   $      10,623
  Accrued expenses and other current
   liabilities                                       31,336          24,132
  Accrued compensation                               47,927          56,152
  Capital leases                                      1,759           3,207
  Unearned revenue                                  572,212         547,151
                                              -------------   -------------
Total current liabilities                           666,554         641,265
Convertible senior notes, net                       496,230         490,501
Unearned revenue, noncurrent                         81,211          85,593
Other liabilities                                    22,539          15,299
                                              -------------   -------------
Total liabilities                                 1,266,534       1,232,658
Stockholders’ equity:
  Common stock                                          188             186
  Additional paid-in capital                      2,000,047       1,948,300
  Accumulated other comprehensive loss                 (279)           (140)
  Accumulated deficit                              (883,929)       (822,371)
                                              -------------   -------------
Total stockholders’ equity                        1,116,027       1,125,975
                                              -------------   -------------
Total liabilities and stockholders’ equity    $   2,382,561   $   2,358,633
                                              =============   =============

(1) Amounts as of January 31, 2015 were derived from the January 31, 2015
 audited financial statements.


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

                                                    Three Months Ended
                                                        April 30,
                                              -----------------------------
                                                   2015            2014
                                              -------------   -------------
Revenues:
  Subscription services                       $     200,993   $     123,407
  Professional services                              49,964          36,330
                                              -------------   -------------
Total revenues                                      250,957         159,737
                                              -------------   -------------
Costs and expenses(1):
  Costs of subscription services                     31,782          21,459
  Costs of professional services                     46,132          35,960
  Product development                                99,335          65,171
  Sales and marketing                                94,895          68,167
  General and administrative                         32,217          21,063
                                              -------------   -------------
Total costs and expenses                            304,361         211,820
                                              -------------   -------------
Operating loss                                      (53,404)        (52,083)
Other expense, net                                   (7,236)         (6,999)
                                              -------------   -------------
Loss before provision for income taxes              (60,640)        (59,082)
Provision for income taxes                              918             307
                                              -------------   -------------
Net loss                                      $     (61,558)  $     (59,389)
                                              =============   =============
Net loss per share, basic and diluted         $       (0.33)  $       (0.32)
                                              =============   =============
Weighted-average shares used to compute net
 loss per share, basic and diluted                  187,390         183,084
                                              =============   =============


(1) Costs and expenses include share-based
 compensation expenses as follows:
    Costs of subscription services            $       2,048   $       1,055
    Costs of professional services                    3,454           2,198
    Product development                              20,811          10,868
    Sales and marketing                               8,365           6,752
    General and administrative                       12,596           8,001


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

                                                    Three Months Ended
                                                        April 30,
                                              -----------------------------
                                                   2015            2014
                                              -------------   -------------
Cash flows from operating activities
Net loss                                      $     (61,558)  $     (59,389)
Adjustments to reconcile net loss to net
 cash provided by (used in) operating
 activities:
Depreciation and amortization                        18,569          12,523
Share-based compensation expenses                    47,274          28,874
Amortization of deferred costs                        4,625           3,952
Amortization of debt discount and issuance
 costs                                                6,250           5,920
Other                                                   737             604
Changes in operating assets and liabilities,
 net of business combinations:
  Accounts receivable                                59,717          (7,013)
  Deferred costs                                     (3,501)         (3,463)
  Prepaid expenses and other assets                  (7,670)         (7,350)
  Accounts payable                                    2,752          (2,430)
  Accrued expense and other liabilities               6,185           1,091
  Unearned revenue                                   20,679          48,378
                                              -------------   -------------
Net cash provided by (used in) operating
 activities                                          94,059          21,697
Cash flows from investing activities
Purchases of marketable securities                 (385,575)       (670,406)
Maturities of marketable securities                 281,407         353,230
Sales of available-for-sale securities               10,000               -
Business combinations, net of cash acquired               -         (26,317)
Purchases of property and equipment                 (30,180)         (9,873)
Other                                                     -           1,000
                                              -------------   -------------
Net cash provided by (used in) investing
 activities                                        (124,348)       (352,366)
Cash flows from financing activities
Proceeds from issuance of common stock from
 employee equity plans                                3,564           2,996
Principal payments on capital lease
 obligations                                         (1,448)         (2,744)
Shares repurchased for tax withholdings on
 vesting of restricted stock                              -          (5,007)
Other                                                   417              60
                                              -------------   -------------
Net cash provided by (used in) financing
 activities                                           2,533          (4,695)
Effect of exchange rate changes                          48              39
                                              -------------   -------------
Net increase (decrease) in cash and cash
 equivalents                                        (27,708)       (335,325)
Cash and cash equivalents at the beginning
 of period                                          298,192         581,326
                                              -------------   -------------
Cash and cash equivalents at the end of
 period                                       $     270,484   $     246,001
                                              =============   =============


                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                     Three Months Ended April 30, 2015
                   (in thousands, except per share data)
                                (unaudited)

                                                     Amortization
                                           Other       of Debt
                          Share-Based    Operating   Discount and
                          Compensation   Expenses      Issuance
                 GAAP       Expenses        (2)         Costs      Non-GAAP
               --------  -------------  ----------  ------------- ---------
Costs and
 expenses:
Costs of
 subscription
 services      $ 31,782  $      (2,048) $     (186) $           - $  29,548
Costs of
 professional
 services        46,132         (3,454)       (354)             -    42,324
Product
 development     99,335        (20,811)     (2,313)             -    76,211
Sales and
 marketing       94,895         (8,365)       (631)             -    85,899
General and
 administrative  32,217        (12,596)       (587)             -    19,034
Operating loss  (53,404)        47,274       4,071              -    (2,059)
Operating
 margin           -21.3%          18.9%        1.6%             -      -0.8%
Other expense,
 net             (7,236)             -           -          6,250      (986)
Loss before
 provision for
 income taxes   (60,640)        47,274       4,071          6,250    (3,045)
Provision for
 income taxes       918              -           -              -       918
Net loss       $(61,558) $      47,274  $    4,071  $       6,250 $  (3,963)
Net loss per
 share, basic
 and diluted
 (1)           $  (0.33) $        0.25  $     0.02  $        0.04 $   (0.02)

(1) Calculated based upon 187,390 basic and diluted weighted-average shares
of common stock.
(2) Other operating expenses include employer payroll tax-related items on
employee stock transactions and amortization of acquisition-related
intangible assets.


                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                     Three Months Ended April 30, 2014
                   (in thousands, except per share data)
                                (unaudited)

                                                     Amortization
                                           Other       of Debt
                          Share-Based    Operating   Discount and
                          Compensation   Expenses      Issuance
                 GAAP       Expenses        (2)         Costs      Non-GAAP
               --------  -------------  ----------  ------------- ---------
Costs and
 expenses:
Costs of
 subscription
 services      $ 21,459  $      (1,055) $      (46) $           - $  20,358
Costs of         35,960         (2,198)                              33,673
 professional
 services                                      (89)             -
Product          65,171        (10,868)                              53,621
 development                                  (682)             -
Sales and        68,167         (6,752)                              61,142
 marketing                                    (273)             -
General and      21,063         (8,001)                              13,471
 administrative                                409              -
Operating loss  (52,083)        28,874         681              -   (22,528)
Operating                         18.1%                               -14.1%
 margin           -32.6%                       0.4%             -
Other expense,                                                       (1,079)
 net             (6,999)             -           -          5,920
Loss before
 provision for
 income taxes   (59,082)        28,874         681          5,920   (23,607)
Provision for
 income taxes       307              -           -              -       307
Net loss       $(59,389) $      28,874  $      681  $       5,920 $ (23,914)
Net loss per
 share, basic
 and diluted
 (1)           $  (0.32) $        0.16  $        -  $        0.03 $   (0.13)


(1) Calculated based upon 183,084 basic and diluted weighted-average shares
 of common stock.
(2) Other operating expenses include employer payroll tax-related items on
 employee stock transactions and amortization of acquisition-related
 intangible assets.


                               Workday, Inc.
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
                       (A Non-GAAP Financial Measure)
                               (in thousands)
                                (unaudited)

                                                         Trailing Twelve
                               Three Months Ended         Months Ended
                                    April 30,               April 30,
                                2015        2014        2015        2014
                             ----------  ----------  ----------  ----------
Net cash provided by (used
 in) operating activities    $   94,059  $   21,697  $  174,365  $   50,650
Purchase of property and
 equipment                      (30,180)     (9,873)   (123,953)    (68,703)
Purchase of other intangible
 assets                               -           -           -     (15,000)
                             ----------  ----------  ----------  ----------
Free cash flows              $   63,879  $   11,824  $   50,412  $  (33,053)
                             ==========  ==========  ==========  ==========


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 loss, non-GAAP net loss per share and free cash flows. Workday has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. The non-GAAP financial measures non-GAAP operating loss and non-GAAP net loss per share differ from GAAP in that they exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization of acquisition-related intangible assets and non-cash interest expense related to our convertible senior notes, as applicable. Free cash flows differ from GAAP cash flows from operating activities in that it treats purchases of property and equipment, property and equipment acquired under capital leases and purchased other (non-acquisition related) intangible assets as a reduction to cash flows.

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 and the ability of operations to generate cash. 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, as they exclude expenses that are not reflective of ongoing operating results. 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 future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.

Management believes excluding the following items from the GAAP Condensed Consolidated Statement 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 in order to better understand the long-term performance
    of our core business and to facilitate comparison of our results to
    those of peer companies. For restricted share awards, the amount of
    share-based compensation expenses is not reflective of the value
    ultimately received by the grant recipients. Moreover, determining the
    fair value of certain of the share-based instruments we utilize
    involves a high degree of judgment and estimation and the expense
    recorded may bear little resemblance to the actual value realized upon
    the vesting or future exercise of the related share-based awards.
    Unlike cash compensation, the value of stock options and the Employee
    Stock Purchase Plan, which is an element of our ongoing share-based
    compensation expenses, is determined using a complex formula that
    incorporates factors, such as market volatility and forfeiture rates,
    that are beyond our control.


--  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 the ongoing operations.


--  Amortization of debt discount and issuance costs. Under GAAP, we are
    required to separately account for liability (debt) and equity
    (conversion option) components of the convertible senior notes that
    were issued in private placements in June 2013. Accordingly, for GAAP
    purposes we are required to recognize the effective interest expense
    on our convertible senior notes and amortize the issuance costs over
    the term of the notes. The difference between the effective interest
    expense and the contractual interest expense and the amortization
    expense of issuance costs are excluded from management’s assessment of
    our operating performance because management believes that these
    non-cash expenses are not indicative of ongoing operating performance.
    Management believes that the exclusion of the non-cash interest
    expense provides investors an enhanced view of the company’s
    operational performance.



Additionally, we believe that the non-GAAP financial measure, free cash flows, is meaningful to investors because we review cash flows generated from or used in operations after deducting capital expenditures, whether purchased or leased, and purchased other intangible assets, due to the fact that these expenditures are considered to be an ongoing operational component of our business. This provides an enhanced view of cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.

The use of non-GAAP operating loss and net loss per share has certain limitations as they do not reflect all items of income and 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.

Investor Relations Contact:
Michael Haase
(925) 951-9005
Michael.Haase@Workday.com

Media Contact:
Eric Glass
(415) 432-3056
Eric.Glass@Workday.com


SOURCE: Workday, Inc.




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