PR Newswire
PLEASANTON, Calif., Aug. 24, 2023
Fiscal Second Quarter Total Revenues of $1.79 Billion, Up 16.3% Year Over Year
Subscription Revenues of $1.62 Billion, Up 18.8% Year Over Year
24-Month Subscription Revenue Backlog of $10.27 Billion, Up 22.7% Year Over Year
Total Subscription Revenue Backlog of $17.85 Billion, Up 32.5% Year Over Year
PLEASANTON, Calif., Aug. 24, 2023 /PRNewswire/ -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2024 second quarter ended July 31, 2023.
Fiscal 2024 Second Quarter Results
- Total revenues were $1.79 billion, an increase of 16.3% from the second quarter of fiscal 2023. Subscription revenues were $1.62 billion, an increase of 18.8% from the same period last year.
- Operating income was $36.3 million, or 2.0% of revenues, compared to an operating loss of $34.1 million, or negative 2.2% of revenues, in the same period last year. Non-GAAP operating income for the second quarter was $421.4 million, or 23.6% of revenues, compared to a non-GAAP operating income of $301.6 million, or 19.6% of revenues, in the same period last year.1
- Basic and diluted net income per share was $0.30, compared to basic and diluted net loss per share of $0.25 in the second quarter of fiscal 2023. Non-GAAP basic and diluted net income per share was $1.45 and $1.43, respectively, compared to non-GAAP basic and diluted net income per share of $0.86 and $0.83, respectively, in the same period last year.2
- Operating cash flows were $425.3 million compared to $114.4 million in the prior year.
- Cash, cash equivalents, and marketable securities were $6.66 billion as of July 31, 2023.
Comments on the News
"We're incredibly well positioned going into the second half of our fiscal year as Workday is increasingly seen as the system of trust for enterprises around the world," said Carl Eschenbach, co-CEO, Workday. "Our customers – now representing more than 65 million users under contract – rely on Workday to manage critical business processes. Our growing customer base, continued global expansion, industry growth, and partner ecosystem momentum set us up for durable long-term success. These factors, combined with the diversity of our products, the strength of our value proposition, and our winning culture make Workday one of the most enduring software businesses of our time."
"Workday delivered another strong quarter, driven by our ongoing focus on employees, customers, and innovation – including our leadership in AI and ML," said Aneel Bhusri, co-founder, co-CEO, and chair, Workday. "We're seeing continued momentum with more than 3,000 customers sharing their data with our ML models, more than 50 million ML inferences processed per day, and multiple generative AI capabilities in development including several that we plan to unveil next month at Workday Rising. We believe this momentum will continue to grow as more companies look to Workday as their trusted partner in responsible implementation of AI and ML."
"The strength of our Q2 results and momentum going into the second half of our fiscal year highlight the compelling opportunity ahead for Workday," said Zane Rowe, chief financial officer, Workday. "We are raising our fiscal 2024 subscription revenue guidance to a range of $6.570 billion to $6.590 billion, representing 18% year-over-year growth. We expect third-quarter subscription revenue to be $1.678 billion to $1.680 billion, or 17% growth. In addition, we are raising our fiscal 2024 non-GAAP operating margin guidance to 23.5%, and we plan on maintaining a disciplined approach of investing in long-term growth while expanding margins."
Recent Highlights
- Workday announced continued momentum for Workday Financial Management with new customers including KinderCare, Metropolitan Community College, Nordic Consulting Inc., Palomar Health, and The Medical College of Wisconsin. Workday also announced new Workday Human Capital Management (HCM) customers including Commercial Vehicle Group, Mercy Aged and Community Care, SoftwareOne AG, and Symrise AG.
- Workday saw continued momentum across its net new and existing customer base, surpassing 65 million users and more than 5,000 core Workday Financial Management and Workday HCM customers.
- Workday saw notable industry growth in Q2, with retail and hospitality joining financial services at $1 billion in annual recurring revenue.
- Workday demonstrated continued leadership in AI and ML, announcing the company's generative AI strategy, and its work with policymakers to help shape the European Parliament's amendments to the proposed AI Act.
- Workday named a Customers' Choice in the2023 Gartner Peer InsightsTM Voice of the Customer for Financial Planning Software report.3
- Workday Adaptive Planning was recognized bySIIA as Best Financial Management Solution. Workday HCM was also named a leader in The Forrester WaveTM: Human Capital Management Q2 2023.
- Workday continued to add to its leadership bench with the appointment of Emma Chalwin to chief marketing officer.
Earnings Call Details
Workday plans to host a conference call today to review its fiscal 2024 second quarter 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. |
3 | Gartner, Voice of the Customer for Financial Planning Software, May 2023. |
Gartner Disclaimer
Gartner and Peer InsightsTM are trademarks of Gartner, Inc. and/or its affiliates. All rights reserved. Gartner Peer Insights Customers' Choice constitute the subjective opinions of individual end-user reviews, ratings, and data applied against a documented methodology; they neither represent the views of, nor constitute an endorsement by, Gartner or its affiliates. Gartner does not endorse any vendor, product or service depicted in this content nor makes any warranties, expressed or implied, with respect to this content, about its accuracy or completeness, including any warranties of merchantability or fitness for a particular purpose.
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 Workday's full-year fiscal 2024 subscription revenues and non-GAAP operating margin, third quarter subscription revenue, growth and expansion, innovation, momentum, opportunity, 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) the regulatory risks related to new and evolving technologies such as machine learning and artificial intelligence; (x) our reliance on our network of partners to drive additional growth of our revenues; (xi) adverse changes in general economic or market conditions; (xii) the regulatory, economic, and political risks associated with our domestic and international operations; (xiii) delays or reductions in information technology spending; and (xiv) 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-Q for the fiscal quarter ended July 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) | |||
July 31, 2023 | January 31, 2023 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 1,435,690 | $ 1,886,311 | |
Marketable securities | 5,221,401 | 4,235,083 | |
Trade and other receivables, net | 1,270,936 | 1,570,086 | |
Deferred costs | 198,677 | 191,054 | |
Prepaid expenses and other current assets | 254,990 | 225,690 | |
Total current assets | 8,381,694 | 8,108,224 | |
Property and equipment, net | 1,221,834 | 1,201,254 | |
Operating lease right-of-use assets | 262,140 | 249,278 | |
Deferred costs, noncurrent | 415,687 | 420,988 | |
Acquisition-related intangible assets, net | 263,056 | 305,465 | |
Goodwill | 2,840,044 | 2,840,044 | |
Other assets | 350,860 | 360,985 | |
Total assets | $ 13,735,315 | $ 13,486,238 | |
Liabilities and stockholders' equity | |||
Current liabilities: | |||
Accounts payable | $ 88,814 | $ 153,751 | |
Accrued expenses and other current liabilities | 259,426 | 260,131 | |
Accrued compensation | 425,911 | 563,548 | |
Unearned revenue | 3,308,998 | 3,559,393 | |
Operating lease liabilities | 98,810 | 91,343 | |
Total current liabilities | 4,181,959 | 4,628,166 | |
Debt, noncurrent | 2,977,845 | 2,975,934 | |
Unearned revenue, noncurrent | 60,463 | 74,540 | |
Operating lease liabilities, noncurrent | 192,138 | 181,799 | |
Other liabilities | 48,357 | 40,231 | |
Total liabilities | 7,460,762 | 7,900,670 | |
Stockholders' equity: | |||
Common stock | 263 | 259 | |
Additional paid-in capital | 9,637,303 | 8,828,639 | |
Treasury stock | (323,695) | (185,047) | |
Accumulated other comprehensive income (loss) | (6,780) | 53,051 | |
Accumulated deficit | (3,032,538) | (3,111,334) | |
Total stockholders' equity | 6,274,553 | 5,585,568 | |
Total liabilities and stockholders' equity | $ 13,735,315 | $ 13,486,238 |
Workday, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) | |||||||
Three Months Ended July 31, | Six Months Ended July 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenues: | |||||||
Subscription services | $ 1,623,939 | $ 1,367,335 | $ 3,151,848 | $ 2,639,411 | |||
Professional services | 162,827 | 168,463 | 319,230 | 331,044 | |||
Total revenues | 1,786,766 | 1,535,798 | 3,471,078 | 2,970,455 | |||
Costs and expenses (1): | |||||||
Costs of subscription services | 255,684 | 244,982 | 494,711 | 477,904 | |||
Costs of professional services | 192,416 | 178,103 | 370,833 | 348,002 | |||
Product development | 609,677 | 547,835 | 1,210,134 | 1,089,344 | |||
Sales and marketing | 524,186 | 458,701 | 1,042,823 | 888,002 | |||
General and administrative | 168,546 | 140,255 | 336,120 | 274,124 | |||
Total costs and expenses | 1,750,509 | 1,569,876 | 3,454,621 | 3,077,376 | |||
Operating income (loss) | 36,257 | (34,078) | 16,457 | (106,921) | |||
Other income (expense), net | 45,555 | (32,789) | 72,264 | (52,952) | |||
Income (loss) before provision for (benefit from) income taxes | 81,812 | (66,867) | 88,721 | (159,873) | |||
Provision for (benefit from) income taxes | 3,152 | (2,709) | 9,925 | 6,458 | |||
Net income (loss) | $ 78,660 | $ (64,158) | $ 78,796 | $ (166,331) | |||
Net income (loss) per share, basic | $ 0.30 | $ (0.25) | $ 0.30 | $ (0.66) | |||
Net income (loss) per share, diluted | $ 0.30 | $ (0.25) | $ 0.30 | $ (0.66) | |||
Weighted-average shares used to compute net income (loss) per share, basic | 261,191 | 254,355 | 260,026 | 253,071 | |||
Weighted-average shares used to compute net income (loss) per share, diluted | 264,435 | 254,355 | 262,923 | 253,071 | |||
(1) Costs and expenses include share-based compensation expenses as follows: | |||||||
Three Months Ended July 31, | Six Months Ended July 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Costs of subscription services | $ 29,988 | $ 25,090 | $ 59,250 | $ 51,320 | |||
Costs of professional services | 28,754 | 25,838 | 58,794 | 53,422 | |||
Product development | 161,975 | 147,181 | 331,909 | 300,485 | |||
Sales and marketing | 66,632 | 59,878 | 146,755 | 119,047 | |||
General and administrative | 64,563 | 50,020 | 124,664 | 95,239 | |||
Total share-based compensation expenses | $ 351,912 | $ 308,007 | $ 721,372 | $ 619,513 |
Workday, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
Three Months Ended July 31, | Six Months Ended July 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ 78,660 | $ (64,158) | $ 78,796 | $ (166,331) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 71,415 | 92,695 | 141,856 | 182,541 | |||
Share-based compensation expenses | 351,912 | 308,007 | 721,372 | 619,513 | |||
Amortization of deferred costs | 52,094 | 42,258 | 100,982 | 81,685 | |||
Non-cash lease expense | 24,283 | 22,911 | 48,157 | 44,959 | |||
(Gains) losses on investments | (865) | 16,499 | 7,276 | 24,579 | |||
Other | (43,872) | 11,413 | (81,460) | 12,122 | |||
Changes in operating assets and liabilities: | |||||||
Trade and other receivables, net | (183,387) | (324,841) | 289,928 | 138,123 | |||
Deferred costs | (68,509) | (64,742) | (103,304) | (106,471) | |||
Prepaid expenses and other assets | 25,447 | (9,885) | 6,635 | (33,882) | |||
Accounts payable | 2,483 | (4,142) | (55,827) | 2,768 | |||
Accrued expenses and other liabilities | 36,003 | 25,065 | (187,311) | (5,808) | |||
Unearned revenue | 79,600 | 63,278 | (264,520) | (239,723) | |||
Net cash provided by (used in) operating activities | 425,264 | 114,358 | 702,580 | 554,075 | |||
Cash flows from investing activities: | |||||||
Purchases of marketable securities | (1,585,332) | (1,329,471) | < |