Workday Announces Fiscal 2023 Third Quarter Financial Results

by Yolanda · Published 11/30/2022 · Updated 05/03/2023

Fiscal Third Quarter Total Revenues of $1.60 Billion, Up 20.5% Year Over Year

Subscription Revenues of $1.43 Billion, Up 22.3% Year Over Year

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

Total Subscription Revenue Backlog of $14.10 Billion, Up 28.5% Year Over Year

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

Fiscal 2023 Third Quarter Results

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.

Comments on the News

“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.”

Recent Highlights

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

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. 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.

Workday, Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited)

	October 31, 2022	January 31, 2022
Assets
Current assets:
Cash and cash equivalents	$ 1,575,955	$ 1,534,273
Marketable securities	3,916,130	2,109,888
Trade and other receivables, net	1,040,468	1,242,545
Deferred costs	171,100	152,957
Prepaid expenses and other current assets	266,622	174,402
Total current assets	6,970,275	5,214,065
Property and equipment, net	1,219,127	1,123,075
Operating lease right-of-use assets	268,110	247,808
Deferred costs, noncurrent	359,624	341,259
Acquisition-related intangible assets, net	326,670	391,002
Goodwill	2,840,044	2,840,044
Other assets	405,937	341,252
Total assets	$ 12,389,787	$ 10,498,505
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$ 75,803	$ 55,487
Accrued expenses and other current liabilities	334,961	195,590
Accrued compensation	406,799	402,885
Unearned revenue	2,815,599	3,110,947
Operating lease liabilities	90,237	80,503
Debt, current	—	1,222,443
Total current liabilities	3,723,399	5,067,855
Debt, noncurrent	2,974,979	617,354
Unearned revenue, noncurrent	63,736	71,533
Operating lease liabilities, noncurrent	196,078	182,456
Other liabilities	22,487	24,225
Total liabilities	6,980,679	5,963,423
Stockholders’ equity:
Common stock	257	251
Additional paid-in capital	8,400,756	7,284,174
Treasury stock	(110,382)	(12,467)
Accumulated other comprehensive income (loss)	104,114	7,709
Accumulated deficit	(2,985,637)	(2,744,585)
Total stockholders’ equity	5,409,108	4,535,082
Total liabilities and stockholders’ equity	$ 12,389,787	$ 10,498,505

Workday, Inc. Condensed Consolidated Statements of Operations (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

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

	Three Months Ended October 31,		Nine Months Ended October 31,
	2022	2021	2022	2021
Costs of subscription services	$ 25,598	$ 21,340	$ 76,918	$ 62,478
Costs of professional services	26,577	29,105	79,999	83,331
Product development	149,279	135,591	449,764	395,345
Sales and marketing	61,186	55,645	180,233	158,121
General and administrative	51,556	39,437	146,795	111,197
Total share-based compensation expenses	$ 314,196	$ 281,118	$ 933,709	$ 810,472

Workday, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Three Months Ended October 31,		Nine Months Ended October 31,
	2022	2021	2022	2021
Cash flows from operating activities:
Net income (loss)	$ (74,721)	$ 43,412	$ (241,052)	$ 102,626
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	91,854	87,127	274,395	254,973
Share-based compensation expenses	314,196	278,995	933,709	808,349
Amortization of deferred costs	44,830	35,482	126,515	100,844
Non-cash lease expense	23,359	21,407	68,318	64,706
(Gains) losses on investments	(3,833)	(25,222)	20,746	(125,479)
Other	3,251	4,408	15,373	(4,225)
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net	61,885	6,649	200,008	171,257
Deferred costs	(56,552)	(50,654)	(163,023)	(129,758)
Prepaid expenses and other assets	2,435	18,050	(31,447)	(21,047)
Accounts payable	18,116	(12,007)	20,884	(4,117)
Accrued expenses and other liabilities	47,061	2,498	41,253	(24,109)
Unearned revenue	(63,213)	(25,491)	(302,936)	(158,465)
Net cash provided by (used in) operating activities	408,668	384,654	962,743	1,035,555
Cash flows from investing activities:
Purchases of marketable securities	(2,310,915)	(722,275)	(5,651,005)	(2,317,040)
Maturities of marketable securities	2,181,147	674,246	3,767,509	2,303,478
Sales of marketable securities	19,988	—	53,355	27,286
Owned real estate projects	(181)	(4)	(446)	(171,498)
Capital expenditures, excluding owned real estate projects	(58,665)	(33,335)	(286,013)	(190,912)
Business combinations, net of cash acquired	—	(60,645)	—	(739,865)
Purchase of other intangible assets	(700)	—	(700)	—
Purchases of non-marketable equity and other investments	(3,250)	(26,720)	(20,173)	(84,526)
Sales and maturities of non-marketable equity and other investments	4,513	1,874	11,674	5,169
Other	—	—	—	1
Net cash provided by (used in) investing activities	(168,063)	(166,859)	(2,125,799)	(1,167,907)
Cash flows from financing activities:
Proceeds from issuance of debt, net of debt discount	—	—	2,978,077	—
Repayments and extinguishment of debt	(1,149,622)	(9,384)	(1,843,605)	(28,205)
Payments for debt issuance costs	—	—	(7,220)	—
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld	710	1,894	85,002	76,381
Other	(161)	(33)	(538)	(409)
Net cash provided by (used in) financing activities	(1,149,073)	(7,523)	1,211,716	47,767
Effect of exchange rate changes	(920)	50	(1,750)	(85)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(909,388)	210,322	46,910	(84,670)
Cash, cash equivalents, and restricted cash at the beginning of period	2,497,043	1,092,929	1,540,745	1,387,921
Cash, cash equivalents, and restricted cash at the end of period	$ 1,587,655	$ 1,303,251	$ 1,587,655	$ 1,303,251

Workday, Inc. Reconciliation of GAAP to Non-GAAP Data Three Months Ended October 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	$ 259,397	$ (25,598)	$ (14,100)	$ —	$ 219,699
Costs of professional services	176,396	(26,577)	(623)	—	149,196
Product development	565,727	(149,279)	(1,899)	—	414,549
Sales and marketing	470,196	(61,186)	(9,206)	—	399,804
General and administrative	153,708	(51,556)	(531)	—	101,621
Operating income (loss)	(26,321)	314,196	26,359	—	314,234
Operating margin	(1.6) %	19.6 %	1.7 %	— %	19.7 %
Other income (expense), net	4,163	—	—	—	4,163
Income (loss) before provision for (benefit from) income taxes	(22,158)	314,196	26,359	—	318,397
Provision for (benefit from) income taxes	52,563	—	—	7,933	60,496
Net income (loss)	$ (74,721)	$ 314,196	$ 26,359	$ (7,933)	$ 257,901
Net income (loss) per share, basic ⁽¹⁾	$ (0.29)	$ 1.23	$ 0.10	$ (0.03)	$ 1.01
Net income (loss) per share, diluted ⁽¹⁾	$ (0.29)	$ 1.23	$ 0.10	$ (0.05)	$ 0.99


(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.

Workday, Inc. Reconciliation of GAAP to Non-GAAP Data Three Months Ended October 31, 2021 (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	$ 200,700	$ (21,340)	$ (12,859)	$ —	$ 166,501
Costs of professional services	159,024	(29,105)	(1,043)	—	128,876
Product development	455,615	(135,591)	(2,870)	—	317,154
Sales and marketing	366,323	(55,645)	(9,642)	—	301,036
General and administrative	121,656	(39,437)	(772)	—	81,447
Operating income (loss)	23,945	281,118	27,186	—	332,249
Operating margin	1.8 %	21.2 %	2.0 %	— %	25.0 %
Other income (expense), net	21,557	—	—	—	21,557
Income (loss) before provision for (benefit from) income taxes	45,502	281,118	27,186	—	353,806
Provision for (benefit from) income taxes	2,090	—	—	65,133	67,223
Net income (loss)	$ 43,412	$ 281,118	$ 27,186	$ (65,133)	$ 286,583
Net income (loss) per share, basic ⁽¹⁾	$ 0.17	$ 1.13	$ 0.11	$ (0.26)	$ 1.15
Net income (loss) per share, diluted ⁽¹⁾	$ 0.17	$ 1.10	$ 0.11	$ (0.28)	$ 1.10


(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.

Workday, Inc. Reconciliation of GAAP to Non-GAAP Data Nine Months Ended October 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	$ 737,301	$ (76,918)	$ (45,022)	$ —	$ 615,361
Costs of professional services	524,398	(79,999)	(5,297)	—	439,102
Product development	1,655,071	(449,764)	(17,146)	—	1,188,161
Sales and marketing	1,358,198	(180,233)	(32,640)	—	1,145,325
General and administrative	427,832	(146,795)	(3,772)	—	277,265
Operating income (loss)	(133,242)	933,709	103,877	—	904,344
Operating margin	(2.9) %	20.4 %	2.3 %	— %	19.8 %
Other income (expense), net	(48,789)	—	—	—	(48,789)
Income (loss) before provision for (benefit from) income taxes	(182,031)	933,709	103,877	—	855,555
Provision for (benefit from) income taxes	59,021	—	—	103,534	162,555
Net income (loss)	$ (241,052)	$ 933,709	$ 103,877	$ (103,534)	$ 693,000
Net income (loss) per share, basic ⁽¹⁾	$ (0.95)	$ 3.68	$ 0.41	$ (0.41)	$ 2.73
Net income (loss) per share, diluted ⁽¹⁾	$ (0.95)	$ 3.68	$ 0.41	$ (0.49)	$ 2.65


(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.

Workday, Inc. Reconciliation of GAAP to Non-GAAP Data Nine Months Ended October 31, 2021 (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	$ 575,646	$ (62,478)	$ (40,195)	$ —	$ 472,973
Costs of professional services	462,652	(83,331)	(9,211)	—	370,110
Product development	1,341,482	(395,345)	(25,573)	—	920,564
Sales and marketing	1,050,974	(158,121)	(36,512)	—	856,341
General and administrative	347,391	(111,197)	(6,091)	—	230,103
Operating income (loss)	(15,488)	810,472	117,582	—	912,566
Operating margin	(0.4) %	21.5 %	3.2 %	— %	24.3 %
Other income (expense), net	115,491	—	—	—	115,491
Income (loss) before provision for (benefit from) income taxes	100,003	810,472	117,582	—	1,028,057
Provision for (benefit from) income taxes	(2,623)	—	—	197,954	195,331
Net income (loss)	$ 102,626	$ 810,472	$ 117,582	$ (197,954)	$ 832,726
Net income (loss) per share, basic ⁽¹⁾	$ 0.42	$ 3.29	$ 0.48	$ (0.81)	$ 3.38
Net income (loss) per share, diluted ⁽¹⁾	$ 0.40	$ 3.19	$ 0.46	$ (0.85)	$ 3.20


(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.

SOURCE Workday Inc.

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