Press Release

Workday Announces Fiscal 2022 Fourth Quarter and Full Year Financial Results

Fiscal Fourth Quarter Total Revenues of $1.38 Billion, Up 21.6% Year Over Year

Subscription Revenues of $1.23 Billion, Up 22.2% Year Over Year

24-Month Subscription Revenue Backlog of $7.98 Billion, Up 22.2% Year Over Year

Total Subscription Revenue Backlog of $12.81 Billion, Up 26.9% Year Over Year

Fiscal Year 2022 Total Revenues $5.14 Billion, Up 19.0% Year Over Year

Subscription Revenues of $4.55 Billion, Up 20.0% Year Over Year

Operating Cash Flows of $1.65 Billion, Up 30.1% Year Over Year

PLEASANTON, Calif., Feb. 28, 2022 /PRNewswire/ -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2022 fourth quarter and full year ended January 31, 2022.

Fiscal 2022 Fourth Quarter Results

  • Total revenues were $1.38 billion, an increase of 21.6% from the fourth quarter of fiscal 2021. Subscription revenues were $1.23 billion, an increase of 22.2% from the same period last year.
  • Operating loss was $101.0 million, or negative 7.3% of revenues, compared to an operating loss of $73.3 million, or negative 6.5% of revenues, in the same period last year. Non-GAAP operating income for the fourth quarter was $237.1 million, or 17.2% of revenues, compared to a non-GAAP operating income of $211.0 million, or 18.6% of revenues, in the same period last year.1
  • Basic and diluted net loss per share was $0.29, compared to a basic and diluted net loss per share of $0.30 in the fourth quarter of fiscal 2021. Non-GAAP basic and diluted net income per share was $0.82 and $0.78, respectively, compared to a non-GAAP basic and diluted net income per share of $0.77 and $0.73, respectively, in the same period last year.2

Fiscal Year 2022 Results

  • Total revenues were $5.14 billion, an increase of 19.0% from fiscal 2021. Subscription revenues were $4.55 billion, an increase of 20.0% from the prior year.
  • Operating loss was $116.5 million, or negative 2.3% of revenues, compared to an operating loss of $248.6 million, or negative 5.8% of revenues, in fiscal 2021. Non-GAAP operating income was $1.15 billion, or 22.4% of revenues, compared to a non-GAAP operating income of $867.2 million, or 20.1% of revenues, in the prior year.1
  • Basic and diluted net income per share was $0.12, compared to a basic and diluted net loss per share of $1.19 in fiscal 2021. Non-GAAP basic and diluted net income per share was $4.20 and $3.99, respectively, compared to a non-GAAP basic and diluted net income per share of $3.06 and $2.93, respectively, in the same period last year.2
  • Operating cash flows were $1.65 billion compared to $1.27 billion in the prior year.
  • Cash, cash equivalents, and marketable securities were $3.64 billion as of January 31, 2022.

Comments on the News

"We closed out the year with another strong quarter that saw continued acceleration of our business, including a growing global workforce and a relentless focus on employees, customers, and innovation," said Aneel Bhusri, co-founder, co-CEO, and chairman, Workday. "We continue to see increasing demand for our broad suite of finance and HR solutions, as we help some of the world's largest organizations – and more than 60 million users – navigate the changing world of work. This momentum, along with our employees' continued commitment, gives me great confidence in the opportunity ahead."

"Our solid fourth quarter results demonstrate our global momentum with new Fortune 500 customer wins, growing interest in our expanding portfolio of solutions, and the closing of several strategic deals across multiple industries," said Chano Fernandez, co-CEO, Workday. "Looking ahead, the pipeline for fiscal 2023 is strong, as we look to continue investing in our people and go-to-market strategies to deliver on our customers' future needs."

"Our exceptional fourth quarter and full-year fiscal 2022 results reflect the broad-based momentum that we see across the business," said Barbara Larson, chief financial officer, Workday. "Given the strength in our fourth quarter and our optimism that the environment will remain robust for finance and HR transformation initiatives, we are raising our guidance for fiscal 2023 subscription revenue to be in a range of $5.530 billion to $5.550 billion, representing year-over-year growth of 22%. We are also raising our fiscal 2023 non-GAAP operating margin guidance to 18.5%. Our market position has never been stronger, and investing to support long-term growth remains our priority."

Recent Highlights

  • Workday increased its workforce by more than 20% in fiscal year 2022, which brings its total employee count to more than 15,200 global employees.
  • Workday announced continued investment in leadership with the appointments of Sheri Rhodes to chief customer officer and Patrick Blair to president of the Americas, helping support the company's growing momentum on the path to $10 billion in revenue.
  • Workday completed its acquisition of VNDLY, which will give customers a unified workforce optimization solution for managing all types of workers—salaried, hourly, contingent, and outsourced—and support a holistic talent strategy.
  • Workday continues to see growing industry momentum within the financial services and retail industries. More than 70% of financial services companies in the Fortune 500 have selected Workday, and over 50% of the 2021 NRF Top 100 Retailers have selected Workday to manage and optimize their retail operations.
  • Workday was listed on Corporate Knights' index of the world's most sustainable firms, which is based on an assessment of nearly 7,000 public companies with revenue over US$1 billion.

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2022 fourth quarter and full year financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

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

1. Non-GAAP operating income excludes 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, non-cash interest expense related to our convertible senior notes, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details.

About Workday

Workday is a leading provider of enterprise cloud applications for finance and human resources, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics have been adopted by thousands of 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.

© 2022 Workday, Inc. All rights reserved. VNDLY, 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." A reconciliation of our forward outlook for non-GAAP operating margin with our forward-looking GAAP operating margin is not available without unreasonable efforts as the quantification of share-based compensation expense, which is excluded from our non-GAAP operating margin, 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 2023 subscription revenues and non-GAAP operating margin, growth, innovation, opportunities, customer demand and momentum, acceleration potential, pipeline, 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) our ability to implement our plans, objectives, and other expectations with respect to VNDLY or any other of our acquired companies; (ii) the impact of the ongoing COVID-19 pandemic on our business, as well as our customers, prospects, partners, and service providers; (iii) 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; (iv) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (v) our ability to manage our growth effectively; (vi) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (vii) the development of the market for enterprise cloud applications and services; (viii) 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 (ix) adverse changes in general economic or market conditions; (x) the regulatory, economic, and political risks associated with our domestic and international operations; (xi) the regulatory risks related to new and evolving technologies such as machine learning, and artificial intelligence (xii) delays or reductions in information technology spending; and (xiii) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on these and additional risks that could affect Workday's results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Form 10-K for the fiscal year ended January 31, 2022, 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.

Workday, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 
 

As of January 31,

 

2022

 

2021

Assets

     

Current assets:

     

Cash and cash equivalents

$      1,534,273

 

$      1,384,181

Marketable securities

2,109,888

 

2,151,472

Trade and other receivables, net

1,242,545

 

1,032,484

Deferred costs

152,957

 

122,764

Prepaid expenses and other current assets

174,402

 

111,160

Total current assets

5,214,065

 

4,802,061

Property and equipment, net

1,123,075

 

972,403

Operating lease right-of-use assets

247,808

 

414,143

Deferred costs, noncurrent

341,259

 

271,796

Acquisition-related intangible assets, net

391,002

 

248,626

Goodwill

2,840,044

 

1,819,625

Other assets

341,252

 

189,757

Total assets

$    10,498,505

 

$      8,718,411

Liabilities and stockholders' equity

     

Current liabilities:

     

Accounts payable

$           55,487

 

$           75,596

Accrued expenses and other current liabilities

195,590

 

169,266

Accrued compensation

402,885

 

285,061

Unearned revenue

3,110,947

 

2,556,624

Operating lease liabilities

80,503

 

93,000

Debt, current

1,222,443

 

1,103,101

Total current liabilities

5,067,855

 

4,282,648

Debt, noncurrent

617,354

 

691,913

Unearned revenue, noncurrent

71,533

 

80,111

Operating lease liabilities, noncurrent

182,456

 

350,051

Other liabilities

24,225

 

35,854

Total liabilities

5,963,423

 

5,440,577

Stockholders' equity:

     

Common stock

251

 

242

Additional paid-in capital

7,284,174

 

6,254,936

Treasury stock

(12,467)

 

(12,384)

Accumulated other comprehensive income (loss)

7,709

 

(54,970)

Accumulated deficit

(2,744,585)

 

(2,909,990)

Total stockholders' equity

4,535,082

 

3,277,834

Total liabilities and stockholders' equity

$    10,498,505

 

$      8,718,411

 

Workday, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2022

 

2021

 

2022

 

2021

Revenues:

             

Subscription services

$      1,229,173

 

$      1,006,251

 

$      4,546,313

 

$      3,788,452

Professional services

146,968

 

125,433

 

592,485

 

529,544

Total revenues

1,376,141

 

1,131,684

 

5,138,798

 

4,317,996

Costs and expenses (1):

             

Costs of subscription services

220,208

 

169,246

 

795,854

 

611,912

Costs of professional services

169,589

 

143,798

 

632,241

 

586,220

Product development

537,738

 

439,095

 

1,879,220

 

1,721,222

Sales and marketing

410,947

 

335,249

 

1,461,921

 

1,233,173

General and administrative

138,621

 

117,607

 

486,012

 

414,068

Total costs and expenses

1,477,103

 

1,204,995

 

5,255,248

 

4,566,595

Operating income (loss)

(100,962)

 

(73,311)

 

(116,450)

 

(248,599)

Other income (expense), net

17,141

 

4,737

 

132,632

 

(26,535)

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

(83,821)

 

(68,574)

 

16,182

 

(275,134)

Provision for (benefit from) income taxes

(10,568)

 

3,133

 

(13,191)

 

7,297

Net income (loss)

$          (73,253)

 

$          (71,707)

 

$            29,373

 

$        (282,431)

Net income (loss) per share, basic

$              (0.29)

 

$              (0.30)

 

$                0.12

 

$              (1.19)

Net income (loss) per share, diluted

$              (0.29)

 

$              (0.30)

 

$                0.12

 

$              (1.19)

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

250,043

 

240,992

 

247,249

 

237,019

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

250,043

 

240,992

 

254,032

 

237,019

         

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

       
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2022

 

2021

 

2022

 

2021

Costs of subscription services

$           23,235

 

$           17,769

 

$           85,713

 

$           63,253

Costs of professional services

30,112

 

27,402

 

113,443

 

101,869

Product development

147,790

 

126,426

 

543,135

 

505,376

Sales and marketing

57,571

 

51,938

 

215,692

 

202,819

General and administrative

43,225

 

33,579

 

154,422

 

131,537

Total share-based compensation expenses

$         301,933

 

$         257,114

 

$      1,112,405

 

$      1,004,854

 

Workday, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
 

Three Months Ended January 31,

 

Year Ended January 31,

 

2022

 

2021

 

2022

 

2021

Cash flows from operating activities:

             

Net income (loss)

$            (73,253)

 

$            (71,707)

 

$             29,373

 

$          (282,431)

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

             

Depreciation and amortization

88,750

 

75,101

 

343,723

 

293,657

Share-based compensation expenses

292,235

 

257,114

 

1,100,584

 

1,004,854

Amortization of deferred costs

37,953

 

30,506

 

138,797

 

112,647

Amortization of debt discount and issuance costs

997

 

12,227

 

3,988

 

53,693

Non-cash lease expense

21,529

 

23,987

 

86,235

 

84,376

(Gains) losses on investments

(20,366)

 

(16,914)

 

(145,845)

 

(16,558)

Other

(6,997)

 

(3,437)

 

(14,213)

 

4,247

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

             

Trade and other receivables, net

(379,190)

 

(286,903)

 

(207,933)

 

(159,240)

Deferred costs

(108,695)

 

(82,629)

 

(238,453)

 

(184,353)

Prepaid expenses and other assets

(14,106)

 

15,379

 

(35,153)

 

52,117

Accounts payable

13,531

 

5,837

 

9,414

 

(3,476)

Accrued expenses and other liabilities

74,780

 

27,906

 

50,671

 

(18,472)

Unearned revenue

687,981

 

567,279

 

529,516

 

327,380

Net cash provided by (used in) operating activities

615,149

 

553,746

 

1,650,704

 

1,268,441

Cash flows from investing activities:

             

Purchases of marketable securities

(541,689)

 

(768,641)

 

(2,858,729)

 

(2,731,885)

Maturities of marketable securities

500,625

 

520,010

 

2,804,103

 

1,802,334

Sales of marketable securities

171,730

 

5,348

 

199,016

 

10,627

Owned real estate projects

(3)

 

(793)

 

(171,501)

 

(6,116)

Capital expenditures, excluding owned real estate projects

(73,355)

 

(48,688)

 

(264,267)

 

(253,380)

Business combinations, net of cash acquired

(450,334)

 

 

(1,190,199)

 

Purchase of other intangible assets

(8,007)

 

(2,950)

 

(8,007)

 

(2,950)

Purchases of non-marketable equity and other investments

(38,485)

 

(4,264)

 

(123,011)

 

(67,482)

Sales and maturities of non-marketable equity and other investments

 

1,005

 

5,169

 

7,228

Other

(1)

 

 

 

Net cash provided by (used in) investing activities

(439,519)

 

(298,973)

 

(1,607,426)

 

(1,241,624)

Cash flows from financing activities:

             

Proceeds from borrowings on Term Loan, net of debt discount and issuance costs

 

 

 

747,795

Payments on convertible senior notes

(34)

 

(66)

 

(114)

 

(250,012)

Payments on Term Loan

(9,375)

 

(9,375)

 

(37,500)

 

(18,750)

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

71,947

 

70,506

 

148,328

 

148,673

Other

(54)

 

(221)

 

(463)

 

(2,657)

Net cash provided by (used in) financing activities

62,484

 

60,844

 

110,251

 

625,049

Effect of exchange rate changes

(620)

 

788

 

(705)

 

1,334

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

237,494

 

316,405

 

152,824

 

653,200

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

1,303,251

 

1,071,516

 

1,387,921

 

734,721

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

$        1,540,745

 

$        1,387,921

 

$        1,540,745

 

$        1,387,921

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Three Months Ended January 31, 2022

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$  220,208

 

$   (23,235)

 

$   (14,356)

 

$            —

 

$  182,617

Costs of professional services

169,589

 

(30,112)

 

(1,970)

 

 

137,507

Product development

537,738

 

(147,790)

 

(7,362)

 

 

382,586

Sales and marketing

410,947

 

(57,571)

 

(10,945)

 

 

342,431

General and administrative

138,621

 

(43,225)

 

(1,534)

 

 

93,862

Operating income (loss)

(100,962)

 

301,933

 

36,167

 

 

237,138

Operating margin

(7.3)%

 

21.9%

 

2.6%

 

—%

 

17.2%

Other income (expense), net

17,141

 

 

 

 

17,141

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

(83,821)

 

301,933

 

36,167

 

 

254,279

Provision for (benefit from) income taxes

(10,568)

 

 

 

58,881

 

48,313

Net income (loss)

$   (73,253)

 

$   301,933

 

$     36,167

 

$   (58,881)

 

$   205,966

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

$       (0.29)

 

$         1.21

 

$         0.14

 

$       (0.24)

 

$         0.82

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

$       (0.29)

 

$         1.21

 

$         0.14

 

$       (0.28)

 

$         0.78

   

(1)

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

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

of common stock. The numerator used to compute non-GAAP diluted net income per share was increased by $1.3 million

for after-tax interest expense on our convertible senior notes in accordance with the if-converted method.

(2)

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

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

(3)

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

consistency across the reporting periods. For fiscal 2022, the non-GAAP tax rate was 19%. Included in the per share

amount is a dilution impact of $0.04 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income

per share.

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Three Months Ended January 31, 2021

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Amortization
of Convertible
Senior Notes
Debt Discount
and Issuance
Costs

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                     

Costs of subscription services

$   169,246

 

$    (17,769)

 

$      (8,501)

 

$            —

 

$            —

 

$   142,976

Costs of professional services

143,798

 

(27,402)

 

(1,643)

 

 

 

114,753

Product development

439,095

 

(126,426)

 

(6,857)

 

 

 

305,812

Sales and marketing

335,249

 

(51,938)

 

(8,956)

 

 

 

274,355

General and administrative

117,607

 

(33,579)

 

(1,226)

 

 

 

82,802

Operating income (loss)

(73,311)

 

257,114

 

27,183

 

 

 

210,986

Operating margin

(6.5)%

 

22.7%

 

2.4%

 

—%

 

—%

 

18.6%

Other income (expense), net

4,737

 

 

 

12,117

 

 

16,854

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

(68,574)

 

257,114

 

27,183

 

12,117

 

 

227,840

Provision for (benefit from) income taxes

3,133

 

 

 

 

40,157

 

43,290

Net income (loss)

$   (71,707)

 

$   257,114

 

$     27,183

 

$     12,117

 

$   (40,157)

 

$   184,550

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

$       (0.30)

 

$         1.07

 

$         0.11

 

$         0.05

 

$       (0.16)

 

$         0.77

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

$       (0.30)

 

$         1.07

 

$         0.11

 

$         0.05

 

$       (0.20)

 

$         0.73

   

(1)

GAAP net loss per share is calculated based upon 240,992 basic and diluted weighted-average shares of common stock.

Non-GAAP net income per share is calculated based upon 240,992 basic and 252,099 diluted weighted-average shares

of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $14.0 million and total employer

payroll tax-related items on employee stock transactions of $13.2 million.

(3)

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

consistency across the reporting periods. For fiscal 2021, the non-GAAP tax rate was 19%. Included in the per share

amount is a dilution impact of $0.03 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income

per share.

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Year Ended January 31, 2022

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                 

Costs of subscription services

$  795,854

 

$   (85,713)

 

$   (54,551)

 

$            —

 

$  655,590

Costs of professional services

632,241

 

(113,443)

 

(11,181)

 

 

507,617

Product development

1,879,220

 

(543,135)

 

(32,935)

 

 

1,303,150

Sales and marketing

1,461,921

 

(215,692)

 

(47,457)

 

 

1,198,772

General and administrative

486,012

 

(154,422)

 

(7,625)

 

 

323,965

Operating income (loss)

(116,450)

 

1,112,405

 

153,749

 

 

1,149,704

Operating margin

(2.3)%

 

21.6%

 

3.1%

 

—%

 

22.4%

Other income (expense), net

132,632

 

 

 

 

132,632

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

16,182

 

1,112,405

 

153,749

 

 

1,282,336

Provision for (benefit from) income taxes

(13,191)

 

 

 

256,835

 

243,644

Net income (loss)

$     29,373

 

$1,112,405

 

$   153,749

 

$ (256,835)

 

$1,038,692

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

$         0.12

 

$         4.50

 

$         0.62

 

$       (1.04)

 

$         4.20

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

$         0.12

 

$         4.38

 

$         0.61

 

$       (1.12)

 

$         3.99

   

(1)

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

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

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

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

(2)

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

tax-related items on employee stock transactions of $75.6 million.

(3)

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

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

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

 

Workday, Inc.

Reconciliation of GAAP to Non-GAAP Data

Year Ended January 31, 2021

(in thousands, except percentages and per share data)

(unaudited)

 
 

GAAP

 

Share-Based
Compensation
Expenses

 

Other
Operating
Expenses (2)

 

Amortization
of Convertible
Senior Notes
Debt Discount
and Issuance
Costs

 

Income Tax
and Dilution
Effects (3)

 

Non-GAAP

Costs and expenses:

                     

Costs of subscription services

$  611,912

 

$   (63,253)

 

$   (34,799)

 

$            —

 

$            —

 

$  513,860

Costs of professional services

586,220

 

(101,869)

 

(6,486)

 

 

 

477,865

Product development

1,721,222

 

(505,376)

 

(27,567)

 

 

 

1,188,279

Sales and marketing

1,233,173

 

(202,819)

 

(35,797)

 

 

 

994,557

General and administrative

414,068

 

(131,537)

 

(6,337)

 

 

 

276,194

Operating income (loss)

(248,599)

 

1,004,854

 

110,986

 

 

 

867,241

Operating margin

(5.8)%

 

23.3%

 

2.6%

 

—%

 

—%

 

20.1%

Other income (expense), net

(26,535)

 

 

 

53,326

 

 

26,791

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

(275,134)

 

1,004,854

 

110,986

 

53,326

 

 

894,032

Provision for (benefit from) income taxes

7,297

 

 

 

 

162,569

 

169,866

Net income (loss)

$ (282,431)

 

$1,004,854

 

$   110,986

 

$     53,326

 

$ (162,569)

 

$   724,166

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

$       (1.19)

 

$         4.24

 

$         0.47

 

$         0.22

 

$       (0.68)

 

$         3.06

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

$       (1.19)

 

$         4.24

 

$         0.47

 

$         0.22

 

$       (0.81)

 

$         2.93

   

(1)

GAAP net loss per share is calculated based upon 237,019 basic and diluted weighted-average shares of common stock.

Non-GAAP net income per share is calculated based upon 237,019 basic and 247,230 diluted weighted-average shares

of common stock.

(2)

Other operating expenses include amortization of acquisition-related intangible assets of $59.8 million and total employer

payroll tax-related items on employee stock transactions of $51.2 million.

(3)

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

consistency across the reporting periods. For fiscal 2021, the non-GAAP tax rate was 19%. Included in the per share

amount is a dilution impact of $0.12 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income

per share.

 

About Non-GAAP Financial Measures

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

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

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

  • Share-based compensation expenses. Although share-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude share-based compensation expenses to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. Share-based compensation expenses are determined using a number of factors, including our stock price, volatility, and forfeiture rates, that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses are not reflective of the value ultimately received by the grant recipients.
  • Other operating expenses. Other operating expenses includes employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus we do not believe it is reflective of ongoing operations. Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
  • Amortization of convertible senior notes debt discount and issuance costs. We adopted Accounting Standard Update No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40), on February 1, 2021, using a modified retrospective method, under which financial results reported in prior periods were not adjusted. Prior to the adoption, we were 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 were 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 were excluded from management's assessment of our operating performance because management believed that these non-cash expenses were not indicative of ongoing operating performance. Management believed that the exclusion of the non-cash interest expense provided investors an enhanced view of Workday's operational performance. Upon adoption, we recombined the liability and equity components of our outstanding convertible senior notes, assuming the instrument was accounted for as a single liability from inception to the date of adoption. We similarly recombined the liability and equity components of the issuance costs. Under this new guidance, we will no longer incur interest expense related to the amortization of the debt discount associated with the conversion option and therefore no longer consider this to be a non-GAAP reconciling item.
  • Income tax effects. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of share-based compensation and related employer payroll taxes, amortization of acquisition-related intangible assets, and amortization of debt discount and issuance costs. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. For fiscal 2023 and 2022, we determined the projected non-GAAP tax rate to be 19%, which reflects currently available information, as well as other factors and assumptions. We will periodically re-evaluate this tax rate, as necessary, for significant events, based on our ongoing analysis of the 2017 U.S. Tax Cuts and Jobs Act, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

The use of non-GAAP operating income (loss) and non-GAAP net income (loss) per share measures have 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.

 
For further information: Investor Relations Contact: Justin Furby, IR@Workday.com; Media Contact: Sion Rogers, Media@Workday.com
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