24-Month Subscription Revenue Backlog of $8.62 Billion, Up 21.1% Year Over Year

PLEASANTON, Calif., November 29, 2022 -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2023 third quarter ended October 31, 2022.

•Total revenues were $1.60 billion, an increase of 20.5% from the third quarter of fiscal 2022. Subscription revenues were $1.43 billion, an increase of 22.3% from the same period last year.

•Operating loss was $26.3 million, or negative 1.6% of revenues, compared to an operating income of $23.9 million, or 1.8% of revenues, in the same period last year. Non-GAAP operating income for the third quarter was $314.2 million, or 19.7% of revenues, compared to a non-GAAP operating income of $332.2 million, or 25.0% of revenues, in the same period last year.1

•Basic and diluted net loss per share was $0.29, compared to basic and diluted net income per share of $0.17 in the third quarter of fiscal 2022. Non-GAAP basic and diluted net income per share was $1.01 and $0.99, respectively, compared to non-GAAP basic and diluted net income per share of $1.15 and $1.10, respectively, in the same period last year.2

•Operating cash flows were $408.7 million compared to $384.7 million in the prior year.

•Cash, cash equivalents, and marketable securities were $5.49 billion as of October 31, 2022.

“We delivered another solid quarter, demonstrating how our cloud finance and HR solutions are vital for global organizations navigating today’s changing world,” said Aneel Bhusri, co-founder, co-CEO, and chairman, Workday. “There is no question that the current macro environment presents increased uncertainty, but, due to the great work of our employees and our continued innovation, we are confident in the long-term opportunity and our ability to navigate the road ahead.”

“Our strong third-quarter results illustrate how global organizations are continuing to choose Workday as the backbone of their digital transformation in the face of constant change,” said Chano Fernandez, co-CEO, Workday. “As we look ahead, we will continue to focus our efforts on industry investments and driving innovation with our open and connected partner ecosystem, which are critical to our customers’ success.”

“We delivered solid third-quarter results, a testament to strong execution across the company as well as the strategic and mission-critical nature of our solutions,” said Barbara Larson, chief financial officer, Workday. “Our updated outlook reflects the ongoing momentum in our business and the power of our business model, while continuing to balance the current environment. We are raising the low end of our fiscal 2023 subscription revenue guidance to a range of $5.555 billion to $5.557 billion, or 22% growth. We are also raising our fiscal 2023 non-GAAP operating margin guidance to 19.2%, reflecting our commitment to delivering healthy growth and profitability.”

•Workday announced that its Board of Directors approved a share repurchase program, with a term of 18 months, to purchase up to $500 million of shares of its Class A common stock.

•Workday announced its vision for a more open and connected partner ecosystem, which includes the launch of Industry Accelerators, a new industry program that accelerates customer enterprise cloud transformations with partners.

•Workday announced new technology and user experience innovations aimed at helping customers meet evolving business and employee needs, including low-code/no-code app development functionality in Workday Extend, the Company's app building solution that helps developers to more quickly and easily build apps on Workday.

•Workday introduced next-generation skills technology, built on an AI/ML foundation, that allows organizations to easily and securely bring skills data in and out of Workday to deliver more personalized employee experiences.

•Workday was named a Leader in the 2022 Gartner® Magic Quadrant™ for Cloud HCM Suites for 1,000+ Employee Enterprises for the seventh consecutive year and positioned the highest for overall Ability to Execute.3

Workday plans to host a conference call today to review its fiscal 2023 third 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.

1Non-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.

2Non-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.

3Gartner, “Magic Quadrant for Cloud HCM Suites for 1,000+ Employee Enterprises,” by Sam Grinter, Chris Pang, Jeff Freyermuth, Ron Hanscome, Helen Poitevin, Ranadip Chandra, John Kostoulas, Emi Chiba, Rania Stewart, October 31, 2022.

Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Gartner and Magic Quadrant are registered trademarks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved.

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.

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, our intended share repurchases, growth, innovation, opportunities, demand, momentum, 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 any of our acquired companies; (ii) the impact of recent macroeconomic events 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-Q for the fiscal quarter ended October 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.

(unaudited)

(in thousands, except per share data)

(unaudited)

			Three Months Ended October 31,												Nine Months Ended October 31,
			2022						2021						2022						2021
Revenues:
Subscription services			$	1,432,393					$	1,171,517					$	4,071,804					$	3,317,140
Professional services			166,710						155,746						497,754						445,517
Total revenues			1,599,103						1,327,263						4,569,558						3,762,657
Costs and expenses (1):
Costs of subscription services			259,397						200,700						737,301						575,646
Costs of professional services			176,396						159,024						524,398						462,652
Product development			565,727						455,615						1,655,071						1,341,482
Sales and marketing			470,196						366,323						1,358,198						1,050,974
General and administrative			153,708						121,656						427,832						347,391
Total costs and expenses			1,625,424						1,303,318						4,702,800						3,778,145
Operating income (loss)			(26,321)						23,945						(133,242)						(15,488)
Other income (expense), net			4,163						21,557						(48,789)						115,491
Income (loss) before provision for (benefit from) income taxes			(22,158)						45,502						(182,031)						100,003
Provision for (benefit from) income taxes			52,563						2,090						59,021						(2,623)
Net income (loss)			$	(74,721)					$	43,412					$	(241,052)					$	102,626
Net income (loss) per share, basic			$	(0.29)					$	0.17					$	(0.95)					$	0.42
Net income (loss) per share, diluted			$	(0.29)					$	0.17					$	(0.95)					$	0.40
Weighted-average shares used to compute net income (loss) per share, basic			255,753						248,468						253,975						246,348
Weighted-average shares used to compute net income (loss) per share, diluted			255,753						254,760						253,975						253,917

    

(unaudited)

Three Months Ended October 31, 2022

(unaudited)

(1)GAAP net loss per share is calculated based upon 255,753 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 255,753 basic and 261,777 diluted weighted-average shares of common stock. The numerator used to compute non-GAAP diluted net income per share was increased by $0.9 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 $21.2 million and employer payroll tax-related items on employee stock transactions of $5.2 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 2023, the non-GAAP tax rate is 19%. Included in the per share amount is a dilution impact of $0.02 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

Three Months Ended October 31, 2021

(unaudited)

(1)GAAP net income per share is calculated based upon 248,468 basic and 254,760 diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 248,468 basic and 262,577 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 $19.7 million and employer payroll tax-related items on employee stock transactions of $7.5 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 projected tax rate was 19%. Included in the per share amount is a dilution impact of $0.02 from the conversion of GAAP diluted net income per share to non-GAAP diluted net income per share.

Nine Months Ended October 31, 2022

(unaudited)

(1)GAAP net loss per share is calculated based upon 253,975 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 253,975 basic and 262,742 diluted weighted-average shares of common stock. The numerator used to compute non-GAAP diluted net income per share was increased by $3.5 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 $64.3 million and employer payroll tax-related items on employee stock transactions of $39.5 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 2023, the non-GAAP tax rate is 19%. Included in the per share amount is a dilution impact of $0.08 from the conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share.

Nine Months Ended October 31, 2021

(unaudited)

(1)GAAP net income per share is calculated based upon 246,348 basic and 253,917 diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 246,348 basic and 261,734 diluted weighted-average shares of common stock. The numerator used to compute non-GAAP diluted net income per share was increased by $3.9 million for after-tax interest expense on our convertible senior notes in accordance with the if-converted method.

(2)Other operating expenses include employer payroll tax-related items on employee stock transactions of $60.1 million and amortization of acquisition-related intangible assets of $57.5 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 $0.07 from the conversion of GAAP diluted net income per share to non-GAAP diluted net income per share.

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), non-GAAP operating margin, 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) and non-GAAP operating margin differ from GAAP in that they exclude 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, 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.

•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), non-GAAP operating margin, 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.

PLEASANTON, Calif., Nov. 29, 2022 -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced that its Board of Directors approved a new share repurchase program with authorization to purchase up to $500 million of shares of its Class A common stock.

“Our investment philosophy remains centered around driving innovation to support long-term profitable growth,” said Barbara Larson, chief financial officer, Workday. “Our scale, combined with the strength of our business model and significant cash flow generation, enables us to continue investing for the long term, while also opportunistically buying back stock through a repurchase program. This program is a direct reflection of our belief that our shares are undervalued, and a demonstration of our confidence in the business and the long-term opportunity ahead.”

The new share repurchase program is designed to reduce the impact of future share dilution from employee stock issuances. Workday may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program will have a term of 18 months, may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of Class A common stock.

This press release contains forward-looking statements including, among other things, statements regarding our intended share repurchases, the value of our Class A common stock, cash flow generation, expected impact to future share dilution, and expected shareholder benefits. 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, risks described in our filings with the Securities and Exchange Commission (“SEC”), including our Form 10-Q for the fiscal quarter ended October 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.