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)) |
Workday, Inc. | |
/s/ Robynne D. Sisco | |
Robynne D. Sisco Co-President and Chief Financial Officer |
• | Total revenues were $582.5 million, an increase of 32.5% from the fourth quarter of fiscal 2017. Subscription revenues were $490.0 million, an increase of 33.7% from the same period last year. |
• | Operating loss was $81.3 million, or negative 14.0% of revenues, compared to an operating loss of $88.9 million, or negative 20.2% of revenues, in the same period last year. Non-GAAP operating profit for the fourth quarter was $55.5 million, or 9.5% of revenues, compared to a non-GAAP operating profit of $25.3 million, or 5.8% of revenues, in the same period last year.1 |
• | Net loss per basic and diluted share was $0.42, compared to a net loss per basic and diluted share of $0.44 in the fourth quarter of fiscal 2017. Non-GAAP net income per diluted share was $0.28, compared to a non-GAAP net income per diluted share of $0.16 in the same period last year.1 |
• | Total revenues were $2.1 billion, an increase of 36.1% from fiscal 2017. Subscription revenues were $1.8 billion, an increase of 38.5% from the prior year. |
• | Operating loss was $303.2 million, or negative 14.1% of revenues, compared to an operating loss of $353.1 million, or negative 22.4% of revenues, in fiscal 2017. Non-GAAP operating profit was $215.6 million, or 10.1% of revenues, compared to a non-GAAP operating profit of $52.6 million, or 3.3% of revenues, in the same period last year.1 |
• | Net loss per basic and diluted share was $1.55, compared to a net loss per basic and diluted share of $1.94 in fiscal 2017. Non-GAAP net income per diluted share was $1.03, compared to a non-GAAP net income per diluted share of $0.23 last year.1 |
• | Operating cash flows were $465.7 million and free cash flows were $324.2 million.2 |
• | Cash, cash equivalents, and marketable securities were $3.3 billion as of January 31, 2018. Unearned revenues were over $1.5 billion, a 25.8% increase from the same period last year. |
• | Workday held its annual Workday Rising Europe conference, bringing together more than 1,800 of the Workday community for education and collaboration in Barcelona, Spain. |
• | Workday announced extended personalization capabilities and tools in Workday HCM with a new people experience. With new functionality on the homepage for Workday HCM, employees will be able to easily perform various workplace tasks across Workday applications and third-party systems without needing to access an HR portal. |
• | Workday announced it acquired SkipFlag, a disruptor in the enterprise knowledge management space, marking another step in Workday's efforts to invest in areas such as machine learning, advanced search, and natural language processing. |
• | Workday announced a partnership with Duo Security, helping complement Workday's already robust, built-in security with seamless integrations that enable customers to leverage Duo's multi-factor authentication functionality right within Workday's user interface. |
• | With data privacy and the General Data Protection Regulation (GDPR) being top-of-mind, Workday announced it joined the General Assembly of the EU Cloud Code of Conduct, a group of cloud service providers working to demonstrate to companies and regulators their compliance with privacy laws in advance of GDPR. |
January 31, | |||||||
2018 | 2017 | ||||||
*As Adjusted | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,134,355 | $ | 539,923 | |||
Marketable securities | 2,133,495 | 1,456,822 | |||||
Trade and other receivables, net | 528,208 | 409,780 | |||||
Deferred costs | 63,060 | 51,330 | |||||
Prepaid expenses and other current assets | 97,860 | 66,590 | |||||
Total current assets | 3,956,978 | 2,524,445 | |||||
Property and equipment, net | 546,609 | 365,877 | |||||
Deferred costs, noncurrent | 140,509 | 117,249 | |||||
Acquisition-related intangible assets, net | 34,234 | 48,787 | |||||
Goodwill | 159,376 | 158,354 | |||||
Other assets | 109,718 | 53,570 | |||||
Total assets | $ | 4,947,424 | $ | 3,268,282 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 20,998 | $ | 26,824 | |||
Accrued expenses and other current liabilities | 121,879 | 61,582 | |||||
Accrued compensation | 148,247 | 110,625 | |||||
Unearned revenue | 1,426,241 | 1,086,212 | |||||
Current portion of convertible senior notes, net | 341,509 | — | |||||
Total current liabilities | 2,058,874 | 1,285,243 | |||||
Convertible senior notes, net | 1,149,845 | 534,423 | |||||
Unearned revenue, noncurrent | 110,906 | 135,331 | |||||
Other liabilities | 47,434 | 36,677 | |||||
Total liabilities | 3,367,059 | 1,991,674 | |||||
Stockholders’ equity: | |||||||
Common stock | 211 | 202 | |||||
Additional paid-in capital | 3,354,423 | 2,681,200 | |||||
Accumulated other comprehensive income (loss) | (46,413 | ) | 2,071 | ||||
Accumulated deficit | (1,727,856 | ) | (1,406,865 | ) | |||
Total stockholders’ equity | 1,580,365 | 1,276,608 | |||||
Total liabilities and stockholders’ equity | $ | 4,947,424 | $ | 3,268,282 |
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||
Revenues: | |||||||||||||||
Subscription services | $ | 490,002 | $ | 366,585 | $ | 1,787,833 | $ | 1,290,733 | |||||||
Professional services | 92,478 | 72,999 | 355,217 | 283,707 | |||||||||||
Total revenues | 582,480 | 439,584 | 2,143,050 | 1,574,440 | |||||||||||
Costs and expenses (1): | |||||||||||||||
Costs of subscription services | 75,834 | 58,165 | 273,461 | 213,389 | |||||||||||
Costs of professional services | 95,118 | 72,016 | 355,952 | 270,156 | |||||||||||
Product development | 253,454 | 191,556 | 910,584 | 680,531 | |||||||||||
Sales and marketing | 179,585 | 153,273 | 683,367 | 565,328 | |||||||||||
General and administrative | 59,824 | 53,513 | 222,909 | 198,122 | |||||||||||
Total costs and expenses | 663,815 | 528,523 | 2,446,273 | 1,927,526 | |||||||||||
Operating loss | (81,335 | ) | (88,939 | ) | (303,223 | ) | (353,086 | ) | |||||||
Other income (expense), net | (7,096 | ) | (2,291 | ) | (11,563 | ) | (32,427 | ) | |||||||
Loss before provision for (benefit from) income taxes | (88,431 | ) | (91,230 | ) | (314,786 | ) | (385,513 | ) | |||||||
Provision for (benefit from) income taxes | 669 | (2,961 | ) | 6,436 | (814 | ) | |||||||||
Net loss | $ | (89,100 | ) | $ | (88,269 | ) | $ | (321,222 | ) | $ | (384,699 | ) | |||
Net loss per share, basic and diluted | $ | (0.42 | ) | $ | (0.44 | ) | $ | (1.55 | ) | $ | (1.94 | ) | |||
Weighted-average shares used to compute net loss per share, basic and diluted | 210,909 | 201,530 | 207,774 | 198,214 |
(1) Costs and expenses include share-based compensation expenses as follows: | |||||||||||||||
Costs of subscription services | $ | 7,110 | $ | 5,936 | $ | 26,280 | $ | 20,773 | |||||||
Costs of professional services | 10,314 | 8,135 | 37,592 | 26,833 | |||||||||||
Product development | 62,751 | 49,279 | 229,819 | 166,529 | |||||||||||
Sales and marketing | 26,144 | 23,786 | 100,762 | 86,229 | |||||||||||
General and administrative | 20,316 | 18,581 | 83,972 | 78,265 |
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net loss | $ | (89,100 | ) | $ | (88,269 | ) | $ | (321,222 | ) | $ | (384,699 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 34,594 | 32,646 | 136,974 | 115,885 | |||||||||||
Share-based compensation expenses | 126,635 | 105,717 | 478,425 | 372,272 | |||||||||||
Amortization of deferred costs | 15,397 | 12,428 | 57,562 | 45,345 | |||||||||||
Amortization of debt discount and issuance costs | 17,924 | 6,876 | 43,916 | 26,947 | |||||||||||
Gain on sale of cost method investment | — | — | (720 | ) | (65 | ) | |||||||||
Impairment of cost method investment | 592 | — | 692 | 15,000 | |||||||||||
Other | (12,919 | ) | (3,660 | ) | (9,602 | ) | (1,982 | ) | |||||||
Changes in operating assets and liabilities, net of business combinations: | |||||||||||||||
Trade and other receivables, net | (174,076 | ) | (117,044 | ) | (114,613 | ) | (91,755 | ) | |||||||
Deferred costs | (42,489 | ) | (41,041 | ) | (92,552 | ) | (82,848 | ) | |||||||
Prepaid expenses and other assets | (45,610 | ) | (5,426 | ) | (68,983 | ) | (16,794 | ) | |||||||
Accounts payable | (10,079 | ) | 4,256 | (7,249 | ) | 6,336 | |||||||||
Accrued expense and other liabilities | (2,273 | ) | (6,252 | ) | 47,515 | 23,367 | |||||||||
Unearned revenue | 307,952 | 209,500 | 315,584 | 323,617 | |||||||||||
Net cash provided by (used in) operating activities | 126,548 | 109,731 | 465,727 | 350,626 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of marketable securities | (686,766 | ) | (345,482 | ) | (2,515,997 | ) | (1,917,238 | ) | |||||||
Maturities of marketable securities | 405,824 | 371,536 | 1,591,554 | 1,986,031 | |||||||||||
Sales of available-for-sale securities | 20,904 | 41,100 | 243,727 | 133,292 | |||||||||||
Business combinations, net of cash acquired | (5,744 | ) | — | (5,744 | ) | (147,879 | ) | ||||||||
Owned real estate projects | (44,660 | ) | (21,518 | ) | (124,811 | ) | (106,997 | ) | |||||||
Capital expenditures, excluding owned real estate projects | (36,059 | ) | (32,278 | ) | (141,536 | ) | (120,813 | ) | |||||||
Purchases of cost method investments | (5,477 | ) | — | (16,199 | ) | (300 | ) | ||||||||
Sales and maturities of cost method investments | — | 5,000 | 1,026 | 5,315 | |||||||||||
Purchase of other intangible assets | (11,000 | ) | — | (11,000 | ) | — | |||||||||
Other | 1,000 | — | — | (296 | ) | ||||||||||
Net cash provided by (used in) investing activities | (361,978 | ) | 18,358 | (978,980 | ) | (168,885 | ) | ||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from borrowings on convertible senior notes, net of issuance costs | — | — | 1,132,101 | — | |||||||||||
Proceeds from issuance of warrants | — | — | 80,805 | — | |||||||||||
Purchase of convertible senior notes hedges | — | — | (175,530 | ) | — | ||||||||||
Proceeds from issuance of common stock from employee equity plans | 32,555 | 24,812 | 69,056 | 58,079 | |||||||||||
Other | (58 | ) | 596 | (170 | ) | 1,602 | |||||||||
Net cash provided by (used in) financing activities | 32,497 | 25,408 | 1,106,262 | 59,681 | |||||||||||
Effect of exchange rate changes | 490 | 28 | 751 | 385 | |||||||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (202,443 | ) | 153,525 | 593,760 | 241,807 | ||||||||||
Cash, cash equivalents, and restricted cash at the beginning of period | 1,338,097 | 388,369 | 541,894 | 300,087 | |||||||||||
Cash, cash equivalents, and restricted cash at the end of period | $ | 1,135,654 | $ | 541,894 | $ | 1,135,654 | $ | 541,894 |
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||
Supplemental cash flow data | |||||||||||||||
Cash paid for interest, net of amounts capitalized | $ | 12 | $ | 452 | $ | 76 | $ | 3,156 | |||||||
Cash paid for income taxes | 159 | 513 | 3,418 | 5,315 | |||||||||||
Non-cash investing and financing activities: | |||||||||||||||
Vesting of early exercised stock options | $ | 105 | $ | 438 | $ | 775 | $ | 1,803 | |||||||
Purchases of property and equipment, accrued but not paid | 51,545 | 27,696 | 51,545 | 27,696 | |||||||||||
Non-cash additions to property and equipment | 4,120 | 1,112 | 5,396 | 2,094 |
January 31, 2018 | January 31, 2017 | ||||||
*As Adjusted | |||||||
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statement of cash flows | |||||||
Cash and cash equivalents | $ | 1,134,355 | $ | 539,923 | |||
Restricted cash included in Other assets | 1,299 | 1,971 | |||||
Total cash, cash equivalents, and restricted cash | $ | 1,135,654 | $ | 541,894 |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (3) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 75,834 | $ | (7,110 | ) | $ | (3,821 | ) | $ | — | $ | 64,903 | |||||||
Costs of professional services | 95,118 | (10,314 | ) | (560 | ) | — | 84,244 | ||||||||||||
Product development | 253,454 | (62,751 | ) | (3,784 | ) | — | 186,919 | ||||||||||||
Sales and marketing | 179,585 | (26,144 | ) | (1,169 | ) | — | 152,272 | ||||||||||||
General and administrative | 59,824 | (20,316 | ) | (859 | ) | — | 38,649 | ||||||||||||
Operating income (loss) | (81,335 | ) | 126,635 | 10,193 | — | 55,493 | |||||||||||||
Operating margin | (14.0 | )% | 21.7 | % | 1.8 | % | — | % | 9.5 | % | |||||||||
Other income (expense), net | (7,096 | ) | — | — | 17,924 | 10,828 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (88,431 | ) | 126,635 | 10,193 | 17,924 | 66,321 | |||||||||||||
Provision for (benefit from) income taxes (1) | 669 | — | — | — | 669 | ||||||||||||||
Net income (loss) | $ | (89,100 | ) | $ | 126,635 | $ | 10,193 | $ | 17,924 | $ | 65,652 | ||||||||
Net income (loss) per share (2) | $ | (0.42 | ) | $ | 0.60 | $ | 0.05 | $ | 0.05 | $ | 0.28 |
(1) | Workday's GAAP tax provision is primarily related to state taxes and income tax in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the US. Accordingly, there is no tax impact associated with the non-GAAP adjustments. |
(2) | GAAP net loss per share is calculated based upon 210,909 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 237,164 diluted weighted-average shares of common stock. |
(3) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $5.3 million and amortization of acquisition-related intangible assets of $4.9 million. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (3) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 58,165 | $ | (5,936 | ) | $ | (160 | ) | $ | — | $ | 52,069 | |||||||
Costs of professional services | 72,016 | (8,135 | ) | (312 | ) | — | 63,569 | ||||||||||||
Product development | 191,556 | (49,279 | ) | (6,381 | ) | — | 135,896 | ||||||||||||
Sales and marketing | 153,273 | (23,786 | ) | (858 | ) | — | 128,629 | ||||||||||||
General and administrative | 53,513 | (18,581 | ) | (853 | ) | — | 34,079 | ||||||||||||
Operating income (loss) | (88,939 | ) | 105,717 | 8,564 | — | 25,342 | |||||||||||||
Operating margin | (20.2 | )% | 24.1 | % | 1.9 | % | — | % | 5.8 | % | |||||||||
Other income (expense), net | (2,291 | ) | — | — | 6,876 | 4,585 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (91,230 | ) | 105,717 | 8,564 | 6,876 | 29,927 | |||||||||||||
Provision for (benefit from) income taxes (1) | (2,961 | ) | — | — | — | (2,961 | ) | ||||||||||||
Net income (loss) | $ | (88,269 | ) | $ | 105,717 | $ | 8,564 | $ | 6,876 | $ | 32,888 | ||||||||
Net income (loss) per share (2) | $ | (0.44 | ) | $ | 0.52 | $ | 0.04 | $ | 0.04 | $ | 0.16 |
(1) | Workday's GAAP tax provision is primarily related to state taxes and income tax in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the US. Accordingly, there is no tax impact associated with the non-GAAP adjustments. |
(2) | GAAP net loss per share is calculated based upon 201,530 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 210,846 diluted weighted-average shares of common stock. |
(3) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $3.5 million and amortization of acquisition-related intangible assets of $5.1 million. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (3) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 273,461 | $ | (26,280 | ) | $ | (7,043 | ) | $ | — | $ | 240,138 | |||||||
Costs of professional services | 355,952 | (37,592 | ) | (2,045 | ) | — | 316,315 | ||||||||||||
Product development | 910,584 | (229,819 | ) | (23,128 | ) | — | 657,637 | ||||||||||||
Sales and marketing | 683,367 | (100,762 | ) | (4,567 | ) | — | 578,038 | ||||||||||||
General and administrative | 222,909 | (83,972 | ) | (3,614 | ) | — | 135,323 | ||||||||||||
Operating income (loss) | (303,223 | ) | 478,425 | 40,397 | — | 215,599 | |||||||||||||
Operating margin | (14.1 | )% | 22.3 | % | 1.9 | % | — | % | 10.1 | % | |||||||||
Other income (expense), net | (11,563 | ) | — | — | 43,916 | 32,353 | |||||||||||||
Income (loss) before provision for (benefit from) income taxes | (314,786 | ) | 478,425 | 40,397 | 43,916 | 247,952 | |||||||||||||
Provision for (benefit from) income taxes (1) | 6,436 | — | — | — | 6,436 | ||||||||||||||
Net income (loss) | $ | (321,222 | ) | $ | 478,425 | $ | 40,397 | $ | 43,916 | $ | 241,516 | ||||||||
Net income (loss) per share (2) | $ | (1.55 | ) | $ | 2.30 | $ | 0.19 | $ | 0.09 | $ | 1.03 |
(1) | Workday's GAAP tax provision is primarily related to state taxes and income tax in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the US. Accordingly, there is no tax impact associated with the non-GAAP adjustments. |
(2) | GAAP net loss per share is calculated based upon 207,774 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 234,089 diluted weighted-average shares of common stock. |
(3) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $21.0 million and amortization of acquisition-related intangible assets of $19.4 million. |
GAAP | Share-Based Compensation Expenses | Other Operating Expenses (3) | Amortization of Debt Discount and Issuance Costs | Non-GAAP | |||||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of subscription services | $ | 213,389 | $ | (20,773 | ) | $ | (730 | ) | $ | — | $ | 191,886 | |||||||
Costs of professional services | 270,156 | (26,833 | ) | (1,199 | ) | — | 242,124 | ||||||||||||
Product development | 680,531 | (166,529 | ) | (18,533 | ) | — | 495,469 | ||||||||||||
Sales and marketing | 565,328 | (86,229 | ) | (3,316 | ) | — | 475,783 | ||||||||||||
General and administrative | 198,122 | (78,265 | ) | (3,302 | ) | — | 116,555 | ||||||||||||
Operating income (loss) | (353,086 | ) | 378,629 | 27,080 | — | 52,623 | |||||||||||||
Operating margin | (22.4 | )% | 24.0 | % | 1.7 | % | — | % | 3.3 | % | |||||||||
Other income (expense), net | (32,427 | ) | — | — | 26,947 | (5,480 | ) | ||||||||||||
Income (loss) before provision for (benefit from) income taxes | (385,513 | ) | 378,629 | 27,080 | 26,947 | 47,143 | |||||||||||||
Provision for (benefit from) income taxes (1) | (814 | ) | — | — | — | (814 | ) | ||||||||||||
Net income (loss) | $ | (384,699 | ) | $ | 378,629 | $ | 27,080 | $ | 26,947 | $ | 47,957 | ||||||||
Net income (loss) per share (2) | $ | (1.94 | ) | $ | 1.91 | $ | 0.14 | $ | 0.12 | $ | 0.23 |
(1) | Workday's GAAP tax provision is primarily related to state taxes and income tax in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the US. Accordingly, there is no tax impact associated with the non-GAAP adjustments. |
(2) | GAAP net loss per share is calculated based upon 198,214 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 208,453 diluted weighted-average shares of common stock. |
(3) | Other operating expenses include total employer payroll tax-related items on employee stock transactions of $14.3 million and amortization of acquisition-related intangible assets of $12.7 million. |
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
*As Adjusted | *As Adjusted | ||||||||||||||
Net cash provided by (used in) operating activities | $ | 126,548 | $ | 109,731 | $ | 465,727 | $ | 350,626 | |||||||
Capital expenditures, excluding owned real estate projects | (36,059 | ) | (32,278 | ) | (141,536 | ) | (120,813 | ) | |||||||
Free cash flows | $ | 90,489 | $ | 77,453 | $ | 324,191 | $ | 229,813 |
• | 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 forfeitures 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. |
• | 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 and September 2017. 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 Workday's operational performance. |