Delaware | 001-35680 | 20-2480422 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I. R. S. Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 | Press release entitled “Workday Announces Fiscal 2017 Third Quarter Financial Results” dated December 1, 2016 |
Workday, Inc. | |
/s/ Robynne D. Sisco | |
Robynne D. Sisco | |
Chief Financial Officer |
Exhibit Number | Exhibit Title | |
99.1 | Press release entitled “Workday Announces Fiscal 2017 Third Quarter Financial Results” dated December 1, 2016 |
• | Total revenues were $409.6 million, an increase of 34.2% from the third quarter of fiscal 2016. Subscription revenues were $335.7 million, an increase of 38.3% from the same period last year. |
• | Operating loss was $109.9 million, or negative 26.8% of revenues, compared to an operating loss of $70.2 million, or negative 23.0% of revenues, in the same period last year. Non-GAAP operating profit for the third quarter was $4.0 million, or 1.0% of revenues, compared to a non-GAAP operating profit of $0.8 million, or 0.3% of revenues, in the same period last year.1 |
• | Net loss per basic and diluted share was $0.57, compared to a net loss per basic and diluted share of $0.41 in the third quarter of fiscal 2016. Non-GAAP net income per diluted share was $0.03, compared to a non-GAAP break-even for the same period last year.1 |
• | Operating cash flows for the third quarter were $71.5 million and free cash flows were $43.9 million. For the trailing twelve months, operating cash flows were $337.7 million and free cash flows were $207.2 million.2 |
• | Cash, cash equivalents and marketable securities were approximately $1.9 billion as of October 31, 2016. Unearned revenues were $1.0 billion, a 42.6% increase from the same period last year. |
• | Workday held its 10th annual customer conference, Workday Rising, bringing together more than 7,000 members of the Workday community for education and collaboration in Chicago. |
• | Workday announced the general availability of Workday Learning, Workday Planning, and Workday Student - three major products that enable customers to replace outdated systems that were disconnected from how organizations want and need to operate. |
• | In response to customer demand, Workday unveiled plans to deliver Data-as-a-Service, a new service that gives customers the option to contribute their Workday data that will be anonymized and aggregated into useful metrics and trends representative of its collective customer community. |
• | Workday closed its acquisition of Platfora, a leading provider of operational analytics and data discovery tools with a team and technology that has been folded into the core of Workday in order to enrich the analytics in Workday Financial Management and Workday HCM. |
• | Underscoring its strong, ongoing commitment to privacy and protecting customers’ data, Workday was one of the first companies to be recognized as complying with the Department of Commerce’s Privacy Shield principles for the transfer of European personal data to the United States. |
October 31, 2016 | January 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 386,557 | $ | 300,087 | |||
Marketable securities | 1,527,238 | 1,669,372 | |||||
Accounts receivable, net | 268,945 | 293,407 | |||||
Deferred costs | 23,067 | 21,817 | |||||
Prepaid expenses and other current assets | 88,788 | 77,625 | |||||
Total current assets | 2,294,595 | 2,362,308 | |||||
Property and equipment, net | 334,265 | 214,158 | |||||
Deferred costs, noncurrent | 33,551 | 30,074 | |||||
Goodwill and acquisition-related intangible assets, net | 212,087 | 65,816 | |||||
Other assets | 48,071 | 57,738 | |||||
Total assets | $ | 2,922,569 | $ | 2,730,094 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 28,374 | $ | 19,605 | |||
Accrued expenses and other current liabilities | 66,075 | 43,122 | |||||
Accrued compensation | 103,206 | 91,211 | |||||
Unearned revenue | 900,441 | 768,741 | |||||
Total current liabilities | 1,098,096 | 922,679 | |||||
Convertible senior notes, net | 527,547 | 507,476 | |||||
Unearned revenue, noncurrent | 123,179 | 130,988 | |||||
Other liabilities | 36,288 | 32,794 | |||||
Total liabilities | 1,785,110 | 1,593,937 | |||||
Stockholders’ equity: | |||||||
Common stock | 200 | 193 | |||||
Additional paid-in capital | 2,549,639 | 2,247,454 | |||||
Accumulated other comprehensive income | 2,622 | 799 | |||||
Accumulated deficit | (1,415,002 | ) | (1,112,289 | ) | |||
Total stockholders’ equity | 1,137,459 | 1,136,157 | |||||
Total liabilities and stockholders’ equity | $ | 2,922,569 | $ | 2,730,094 |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Subscription services | $ | 335,722 | $ | 242,700 | $ | 921,953 | $ | 667,435 | |||||||
Professional services | 73,860 | 62,566 | 210,782 | 171,484 | |||||||||||
Total revenues | 409,582 | 305,266 | 1,132,735 | 838,919 | |||||||||||
Costs and expenses(1): | |||||||||||||||
Costs of subscription services | 54,645 | 39,791 | 155,224 | 106,860 | |||||||||||
Costs of professional services | 72,240 | 61,963 | 198,140 | 164,887 | |||||||||||
Product development | 185,311 | 124,020 | 488,975 | 338,700 | |||||||||||
Sales and marketing | 149,549 | 111,658 | 416,217 | 312,983 | |||||||||||
General and administrative | 57,721 | 38,008 | 144,609 | 106,707 | |||||||||||
Total costs and expenses | 519,466 | 375,440 | 1,403,165 | 1,030,137 | |||||||||||
Operating loss | (109,884 | ) | (70,174 | ) | (270,430 | ) | (191,218 | ) | |||||||
Other expense, net | (3,105 | ) | (6,722 | ) | (30,136 | ) | (17,737 | ) | |||||||
Loss before provision for (benefit from) income taxes | (112,989 | ) | (76,896 | ) | (300,566 | ) | (208,955 | ) | |||||||
Provision for (benefit from) income taxes | 1,077 | 915 | 2,147 | (165 | ) | ||||||||||
Net loss | $ | (114,066 | ) | $ | (77,811 | ) | $ | (302,713 | ) | $ | (208,790 | ) | |||
Net loss per share, basic and diluted | $ | (0.57 | ) | $ | (0.41 | ) | $ | (1.54 | ) | $ | (1.10 | ) | |||
Weighted-average shares used to compute net loss per share, basic and diluted | 199,479 | 190,727 | 197,093 | 189,185 |
(1) Costs and expenses include share-based compensation expenses as follows: | |||||||||||||||
Costs of subscription services | $ | 5,472 | $ | 3,203 | $ | 14,837 | $ | 8,424 | |||||||
Costs of professional services | 7,436 | 5,424 | 18,698 | 14,022 | |||||||||||
Product development | 45,968 | 29,547 | 117,250 | 78,990 | |||||||||||
Sales and marketing | 22,597 | 15,321 | 62,443 | 36,908 | |||||||||||
General and administrative | 24,982 | 15,164 | 59,684 | 42,353 |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net loss | $ | (114,066 | ) | $ | (77,811 | ) | $ | (302,713 | ) | $ | (208,790 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 30,453 | 22,260 | 83,239 | 60,717 | |||||||||||
Share-based compensation expenses | 100,098 | 68,659 | 266,555 | 180,697 | |||||||||||
Amortization of deferred costs | 6,507 | 5,389 | 18,520 | 17,749 | |||||||||||
Amortization of debt discount and issuance costs | 6,782 | 6,422 | 20,071 | 19,008 | |||||||||||
Gain on sale of cost method investment | — | — | (65 | ) | (3,220 | ) | |||||||||
Impairment of cost method investment | — | — | 15,000 | — | |||||||||||
Other | 78 | 48 | 1,678 | (1,334 | ) | ||||||||||
Changes in operating assets and liabilities, net of business combinations: | |||||||||||||||
Accounts receivable | (20,360 | ) | (14,727 | ) | 24,695 | 17,420 | |||||||||
Deferred costs | (7,973 | ) | (8,744 | ) | (23,247 | ) | (19,327 | ) | |||||||
Prepaid expenses and other assets | (1,425 | ) | (9,522 | ) | (14,103 | ) | (24,998 | ) | |||||||
Accounts payable | 2,260 | (3,719 | ) | 2,080 | 461 | ||||||||||
Accrued expense and other liabilities | 30,591 | 29,785 | 29,619 | 36,700 | |||||||||||
Unearned revenue | 38,514 | 34,719 | 117,854 | 85,063 | |||||||||||
Net cash provided by (used in) operating activities | 71,459 | 52,759 | 239,183 | 160,146 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of marketable securities | (380,620 | ) | (623,377 | ) | (1,571,756 | ) | (1,485,422 | ) | |||||||
Maturities of marketable securities | 449,592 | 551,270 | 1,614,495 | 1,261,863 | |||||||||||
Sales of available-for-sale securities | 63,340 | 69,187 | 92,192 | 98,711 | |||||||||||
Business combinations, net of cash acquired | (144,209 | ) | (23,475 | ) | (147,879 | ) | (31,436 | ) | |||||||
Owned real estate projects | (59,705 | ) | — | (85,479 | ) | — | |||||||||
Capital expenditures, excluding owned real estate projects | (27,518 | ) | (37,893 | ) | (88,535 | ) | (91,682 | ) | |||||||
Purchases of cost method investments | — | (700 | ) | (300 | ) | (16,450 | ) | ||||||||
Sale of cost method investment | — | — | 315 | 3,538 | |||||||||||
Change in restricted cash | 3,900 | — | (100 | ) | — | ||||||||||
Other | — | — | (296 | ) | — | ||||||||||
Net cash provided by (used in) investing activities | (95,220 | ) | (64,988 | ) | (187,343 | ) | (260,878 | ) | |||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from issuance of common stock from employee equity plans | 4,491 | 2,360 | 33,267 | 25,096 | |||||||||||
Principal payments on capital lease obligations | — | (663 | ) | — | (3,127 | ) | |||||||||
Other | 435 | 246 | 1,006 | 1,025 | |||||||||||
Net cash provided by (used in) financing activities | 4,926 | 1,943 | 34,273 | 22,994 | |||||||||||
Effect of exchange rate changes | (137 | ) | (399 | ) | 357 | (561 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (18,972 | ) | (10,685 | ) | 86,470 | (78,299 | ) | ||||||||
Cash and cash equivalents at the beginning of period | 405,529 | 230,578 | 300,087 | 298,192 | |||||||||||
Cash and cash equivalents at the end of period | $ | 386,557 | $ | 219,893 | $ | 386,557 | $ | 219,893 | |||||||
Supplemental cash flow data | |||||||||||||||
Cash paid for interest | $ | 48 | $ | 8 | $ | 3,293 | $ | 3,252 | |||||||
Cash paid for income taxes | 655 | 618 | 4,802 | 1,652 | |||||||||||
Non-cash investing and financing activities: | |||||||||||||||
Vesting of early exercise stock options | $ | 445 | $ | 472 | $ | 1,365 | $ | 1,416 | |||||||
Property and equipment, accrued but not paid | 25,917 | 17,237 | 25,917 | 17,237 | |||||||||||
Non-cash additions to property and equipment | 67 | 4,308 | 982 | 6,491 |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses(2) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 54,645 | $ | (5,472 | ) | $ | (118 | ) | $ | — | $ | 49,055 | |||||||
Costs of professional services | 72,240 | (7,436 | ) | (171 | ) | — | 64,633 | ||||||||||||
Product development | 185,311 | (45,968 | ) | (5,792 | ) | — | 133,551 | ||||||||||||
Sales and marketing | 149,549 | (22,597 | ) | (661 | ) | — | 126,291 | ||||||||||||
General and administrative | 57,721 | (24,982 | ) | (713 | ) | — | 32,026 | ||||||||||||
Operating income (loss) | (109,884 | ) | 106,455 | 7,455 | — | 4,026 | |||||||||||||
Operating margin | (26.8 | )% | 26.0 | % | 1.8 | % | — | % | 1.0 | % | |||||||||
Other income (expense), net | (3,105 | ) | — | — | 6,782 | 3,677 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (112,989 | ) | 106,455 | 7,455 | 6,782 | 7,703 | |||||||||||||
Provision for (benefit from) income taxes | 1,077 | — | — | — | 1,077 | ||||||||||||||
Net income (loss) | $ | (114,066 | ) | $ | 106,455 | $ | 7,455 | $ | 6,782 | $ | 6,626 | ||||||||
Net income (loss) per share (1) | $ | (0.57 | ) | $ | 0.53 | $ | 0.04 | $ | 0.03 | $ | 0.03 |
(1) | GAAP net loss per share calculated based upon 199,479 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share calculated based upon 209,924 diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $2.6 million, and amortization of acquisition-related intangible assets of $4.9 million recorded as part of product development expenses. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses(2) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 39,791 | $ | (3,203 | ) | $ | (64 | ) | $ | — | $ | 36,524 | |||||||
Costs of professional services | 61,963 | (5,424 | ) | (107 | ) | — | 56,432 | ||||||||||||
Product development | 124,020 | (29,547 | ) | (1,594 | ) | — | 92,879 | ||||||||||||
Sales and marketing | 111,658 | (15,321 | ) | (196 | ) | — | 96,141 | ||||||||||||
General and administrative | 38,008 | (15,164 | ) | (396 | ) | — | 22,448 | ||||||||||||
Operating income (loss) | (70,174 | ) | 68,659 | 2,357 | — | 842 | |||||||||||||
Operating margin | (23.0 | )% | 22.5 | % | 0.8 | % | — | % | 0.3 | % | |||||||||
Other income (expense), net | (6,722 | ) | — | — | 6,422 | (300 | ) | ||||||||||||
Income (loss) before provision for (benefit from) income taxes | (76,896 | ) | 68,659 | 2,357 | 6,422 | 542 | |||||||||||||
Provision for (benefit from) income taxes | 915 | — | — | — | 915 | ||||||||||||||
Net income (loss) | $ | (77,811 | ) | $ | 68,659 | $ | 2,357 | $ | 6,422 | $ | (373 | ) | |||||||
Net income (loss) per share (1) | $ | (0.41 | ) | $ | 0.36 | $ | 0.01 | $ | 0.04 | $ | — |
(1) | Calculated based upon 190,727 basic and diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $1.3 million, and amortization of acquisition-related intangible assets of $1.1 million recorded as part of product development expenses. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses(2) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 155,224 | $ | (14,837 | ) | $ | (570 | ) | $ | — | $ | 139,817 | |||||||
Costs of professional services | 198,140 | (18,698 | ) | (887 | ) | — | 178,555 | ||||||||||||
Product development | 488,975 | (117,250 | ) | (12,152 | ) | — | 359,573 | ||||||||||||
Sales and marketing | 416,217 | (62,443 | ) | (2,458 | ) | — | 351,316 | ||||||||||||
General and administrative | 144,609 | (59,684 | ) | (2,449 | ) | — | 82,476 | ||||||||||||
Operating income (loss) | (270,430 | ) | 272,912 | 18,516 | — | 20,998 | |||||||||||||
Operating margin | (23.9 | )% | 24.1 | % | 1.7 | % | — | % | 1.9 | % | |||||||||
Other income (expense), net | (30,136 | ) | — | — | 20,071 | (10,065 | ) | ||||||||||||
Income (loss) before provision for (benefit from) income taxes | (300,566 | ) | 272,912 | 18,516 | 20,071 | 10,933 | |||||||||||||
Provision for (benefit from) income taxes | 2,147 | — | — | — | 2,147 | ||||||||||||||
Net income (loss) | $ | (302,713 | ) | $ | 272,912 | $ | 18,516 | $ | 20,071 | $ | 8,786 | ||||||||
Net income (loss) per share (1) | $ | (1.54 | ) | $ | 1.38 | $ | 0.09 | $ | 0.11 | $ | 0.04 |
(1) | GAAP net loss per share calculated based upon 197,093 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share calculated based upon 207,685 diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $10.9 million, and amortization of acquisition-related intangible assets of $7.6 million recorded as part of product development expenses. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses(2) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 106,860 | $ | (8,424 | ) | $ | (326 | ) | $ | — | $ | 98,110 | |||||||
Costs of professional services | 164,887 | (14,022 | ) | (631 | ) | — | 150,234 | ||||||||||||
Product development | 338,700 | (78,990 | ) | (4,975 | ) | — | 254,735 | ||||||||||||
Sales and marketing | 312,983 | (36,908 | ) | (1,154 | ) | — | 274,921 | ||||||||||||
General and administrative | 106,707 | (42,353 | ) | (1,499 | ) | — | 62,855 | ||||||||||||
Operating income (loss) | (191,218 | ) | 180,697 | 8,585 | — | (1,936 | ) | ||||||||||||
Operating margin | (22.8 | )% | 21.6 | % | 1.0 | % | — | % | (0.2 | )% | |||||||||
Other income (expense), net | (17,737 | ) | — | — | 19,008 | 1,271 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (208,955 | ) | 180,697 | 8,585 | 19,008 | (665 | ) | ||||||||||||
Provision for (benefit from) income taxes | (165 | ) | — | — | — | (165 | ) | ||||||||||||
Net income (loss) | $ | (208,790 | ) | $ | 180,697 | $ | 8,585 | $ | 19,008 | $ | (500 | ) | |||||||
Net income (loss) per share (1) | $ | (1.10 | ) | $ | 0.95 | $ | 0.05 | $ | 0.10 | $ | — |
(1) | Calculated based upon 189,185 basic and diluted weighted-average shares of common stock. |
(2) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $6.8 million, and amortization of acquisition-related intangible assets of $1.8 million recorded as part of product development expenses. |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net cash provided by (used in) operating activities | $ | 71,459 | $ | 52,759 | $ | 239,183 | $ | 160,146 | |||||||
Capital expenditures, excluding owned real estate projects | (27,518 | ) | (37,893 | ) | (88,535 | ) | (91,682 | ) | |||||||
Free cash flows | $ | 43,941 | $ | 14,866 | $ | 150,648 | $ | 68,464 | |||||||
Trailing Twelve Months Ended October 31, | |||||||||||||||
2016 | 2015 | ||||||||||||||
Net cash provided by (used in) operating activities | $ | 337,674 | $ | 208,421 | |||||||||||
Capital expenditures, excluding owned real estate projects | (130,520 | ) | (129,347 | ) | |||||||||||
Free cash flows | $ | 207,154 | $ | 79,074 |
• | 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 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 stock unit 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 shares offered under our Employee Stock Purchase Plan, which are elements 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 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. |