Workday Announces Fiscal 2013 Third Quarter Financial Results

Workday Announces Fiscal 2013 Third Quarter Financial Results 
Total Revenue of $72.6 Million, Up 99% Year Over Year; Subscription
Revenue of $51.6 Million, Up 116% Year Over Year 
PLEASANTON, CA -- (Marketwire) -- 11/28/12 --  Workday, Inc. (NYSE:
WDAY), a leader in enterprise cloud applications for human resources
and finance, today announced financial results for the third quarter
of fiscal 2013: 


 
--  Total revenues were $72.6 million, an increase of 99% from the third
    quarter of fiscal 2012. Subscription revenues were $51.6 million, an
    increase of 116% from same period last year.
    
    
--  Operating loss for the third quarter was $40.9 million, compared to an
    operating loss of $19.4 million in the same period last year. Non-GAAP
    operating loss for the third quarter was $23.5 million, compared to a
    non-GAAP operating loss of $18.3 million last year.(1)
    
    
--  Net loss for the quarter was $41.3 million, compared to a net loss of
    $19.7 million in the third quarter of fiscal 2012. Non-GAAP net loss
    for the third quarter was $23.9 million, compared to a non-GAAP net
    loss of $18.6 million last year.(1)
    
    
--  Net loss per basic and diluted share for the third quarter was $0.67,
    compared to a loss per basic and diluted share of $0.66 in the third
    quarter of fiscal 2012. The third quarter non-GAAP loss per basic and
    diluted share was $0.39, compared to a non-GAAP loss per basic and
    diluted share of $0.63 during the same period last year.(1)
    
    
--  Operating cash flows were a negative $9.4 million in the third quarter
    and a negative $1.4 million for the trailing twelve months. Free cash
    flows were a negative $23.8 million in the third quarter and a
    negative $32.2 million for the trailing twelve months.(2)

  
Cash, cash equivalents and marketable securities were $797.4 million as
of October 31, 2012 and include net proceeds from our October initial
public offering of $684.6 million. Unearned revenue was $252.2
million, a 64% increase from last year. 
"Workday had a strong third quarter, and we continue to make great
strides as we build for the long term," said Aneel Bhusri, chairman,
co-founder, and co-CEO, Workday. "Our pace of innovatio
n, high levels
of customer satisfaction, and employee-centric culture are key
contributors to our growth. With these differentiators, we see more
companies choosing Workday to bring HR, finance, and analytics to the
cloud." 
"Workday is well positioned for growth as a leader in cloud-based
human capital management and financial management applications," said
Mark Peek, chief financial officer, Workday. "Fiscal 2013 fourth
quarter revenues are expected to be in the range of $75 and $79
million, or growth of 74-83% as compared to the prior year. Fourth
quarter subscription revenues are anticipated to be within a range of
$56 and $58 million." 
Recent Highlights  


 
--  In the third quarter, Workday added several significant customers,
    including DuPont, Johnson Controls, and Yale University, as well as
    J.B. Hunt for Financial Management.
    
    
--  In August, Workday delivered Workday Time Tracking, a new global time
    and attendance application that enables enterprises to collect,
    process, and manage time and labor for their global workforce.
    
    
--  At Workday Rising, the company's annual customer conference, Workday
    announced it is building two new applications. Workday Big Data
    Analytics, expected to be available in the second half of 2013, will
    enable customers to make more informed business decisions based on a
    holistic view of workforce and financial information. Workday
    Recruiting, expected to be available in the first half of 2014, is
    designed to transform the recruiting process by delivering a complete
    talent acquisition solution for hiring teams.

  
Workday plans to host a conference call today to review its fiscal 2013
third quarter financial results and to discuss its financial outlook.
The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can
be accessed via webcast or through the company's Investor Relations
website at www.workday.com/investorrelations. The webcast will be
available live, and a replay will be available following completion
of the live broadcast for approximately 45 days.  
(1) Non-GAAP operating results, net loss, and net loss per share for
the fiscal third quarters of 2012 and 2013 exclude share-based
compensation, and for the fiscal 2013 third quarter, also exclude a
one-time charge related to our contribution of 500,000 shares to the
Workday Foundation. See the section titled "About Non-GAAP Financial
Measures" in the accompanying financial tables for further details.  
(2) Free cash flows are defined as operating cash flows minus capital
expenditures and property and equipment acquired under capital lease.
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 human resources and finance. Founded in 2005,
Workday delivers Human Capital Management, Financial Management, and
analytics applications designed for the world's largest
organizations. Hundreds of companies, ranging from medium-sized
businesses to Fortune 50 enterprises, have selected Workday. 
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."  
Forward-Looking Statements 
 This press release contains
forward-looking statements including, among other things, statements
regarding Workday's fourth quarter revenue and subscription revenue
projections, and our expectations for future applications. The words
"believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "expect," and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
subject to risks, uncertainties, and assumptions. If the risks
materialize or assumptions prove incorrect, actual results could
differ materially from the results implied by these forward-looking
statements. Risks include, but are not limited to: (i) adverse
changes in general economic or market conditions; (ii) delays or
reductions in information technology spending; (iii) competitive
factors, including but not limited to pricing pressures, industry
consolidation, entry of new competitors and new applications and
marketing initiatives by our competitors; (iv) our ability to manage
our growth effectively; (v) our limited operating history, which
makes it difficult to predict future results; (vi) the development of
the market for enterprise cloud services; (vii) acceptance of our
applications and services by customers; (viii) breaches in our
security measures or unauthorized access to our customers' data; and
(ix) changes in sales may not be immediately reflected in our results
due to our subscription model. Further information on risks that
could affect Workday's results is included in our filings with the
Securities and Exchange Commission, including our registration
statement on Form S-1 and
 our future reports on Form 10-K and Form
10-Q and current reports on Form 8-K that we may file 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, Inc. services should make their purchase
decisions based upon services, features and functions that are
currently available. 
Copyright 2012. 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, except share and per share data)               
                                                                            
                                                  October 31,   January 31, 
                                                     2012          2012     
                                                 ------------  ------------ 
                                                  (unaudited)               
Assets                                                                      
Current assets:                                                             
  Cash and cash equivalents                      $    442,980  $     57,529 
  Marketable securities                               354,397        53,634 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $778 at October 31, 2012                            
   and $261 at January 31, 2012                        61,099        54,467 
  Deferred costs                                        8,636         9,450 
  Prepaid expenses and other current assets            14,542         8,092 
                                                 ------------  ------------ 
Total current assets                                  881,654       183,172 
                                                                            
Property and equipment, net                            39,760        25,861 
Deferred costs, noncurrent                             17,060        13,156 
Goodwill and intangible assets, net                     8,509         8,578 
Other assets                                            3,165         1,871 
                                                 ------------  ------------ 
Total assets                                     $    950,148  $    232,638 
                                                 ============  ============ 
                                                                            
Liabilities, redeemable convertible preferred                               
 stock and stockholders' equity (deficit)                                   
Current liabilities:                                                        
  Accounts payable                               $      3,481  $      2,730 
  Accrued expenses and other current liabilities       14,925         6,808 
  Accrued compensation                                 22,487        13,891 
  Capital leases                                        6,946         3,561 
  Capital leases with related party                     2,634         3,514 
  Unearned revenue                                    164,421       114,734 
                                                 ------------  ------------ 
Total current liabilities                             214,894       145,238 
Capital leases, noncurrent                             17,144         6,594 
Capital lease with related party, noncurrent              289         2,047 
Unearned revenue, noncurrent                           87,742        73,363 
Other liabilities                                      14,578        10,051 
                                                 ------------  ------------ 
Total liabilities                                     334,647       237,293 
Commitments and contingencies                                               
Redeemable convertible preferred stock, $0.001                              
 par value; no shares and 31 million shares                                 
 authorized as of October 31, 2012 and January                              
 31, 2012; no shares and 30 million shares                                  
 issued and outstanding as of October 31, 2012                              
 and January 31, 2012 with liquidation                                      
 preference of $174,340 as of January 31, 2012              -       170,906 
Stockholder's equity (deficit):                                             
  Convertible preferred stock, $0.001 par value;                            
   no shares and 68 million shares authorized as                            
   of October 31, 2012 and January 31, 2012; no                             
   shares and 68 million shares issued and                                  
   outstanding as of October 31, 2012 and                                   
   January 31, 2012 with liquidation preference                             
   of $93,716 as of January 31, 2012                        -            68 
  Preferred Stock, $0.001 par value; 10 million                             
   shares authorized and no shares issued and                               
   outstanding as of October 31, 2012                       -             - 
  Class A common stock, $0.001 par value; 750                               
   million shares authorized as of October 31,                              
   2012 and 26 million shares issued and                                    
   outstanding as of October 31, 2012                      26             - 
  Class B common stock $0.001 par value; 240                                
   million shares authorized as of October 31,                              
   2012 and 140 million shares issued and                                   
   outstanding as of October 31, 2012 (including                            
   4 million shares, subject to repurchase,                                 
   legally issued and outstanding as of October                             
   31, 2012)                                              134             - 
  Common stock, $0.001 par value; no shares and                             
   200 million shares authorized as of October                              
   31, 2012 and January 31, 2012; no shares and                             
   36 million shares issued and outstanding as                              
   of October 31, 2012 and January 31, 2012                                 
   (including 3 million shares, subject to                                  
   repurchase, legally issued and outstanding as                            
   of January 31, 2012)                                
     -            33 
  Additional paid-in capital                          986,245       106,457 
  Accumulated other comprehensive income                   32             3 
  Accumulated deficit                                (370,936)     (282,122)
                                                 ------------  ------------ 
Total stockholders' equity (deficit)                  615,501      (175,561)
                                                 ------------  ------------ 
Total liabilities, redeemable preferred stock                               
 and stockholders' equity (deficit)              $    950,148  $    232,638 
                                                 ============  ============ 
                                                                            
                                                                            
                               Workday, Inc.                                
              Condensed Consolidated Statements of Operations               
                   (in thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                      October 31,           October 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
Revenues                         $  72,618  $  36,450  $ 192,138  $  91,269 
Costs and expenses(1):                                                      
Costs of revenues                   30,194     17,679     83,549     45,038 
Research and development            28,075     16,404     72,413     43,727 
Sales and marketing                 32,584     18,215     87,051     47,774 
General and administrative          22,633      3,594     36,310     10,083 
                                 ---------  ---------  ---------  --------- 
    Total costs and expenses       113,486     55,892    279,323    146,622 
Operating loss                     (40,868)   (19,442)   (87,185)   (55,353)
Other expense, net                    (364)      (243)    (1,036)      (574)
                                 ---------  ---------  ---------  --------- 
Loss before provision for income                                            
 taxes                             (41,232)   (19,685)   (88,221)   (55,927)
Provision for income taxes              78         46         25        116 
                                 ---------  ---------  ---------  --------- 
Net loss                           (41,310)   (19,731)   (88,246)   (56,043)
                                 ---------  ---------  ---------  --------- 
Accretion of redeemable                                                     
 convertible preferred stock          (161)       (72)      (568)       (85)
                                 ---------  ---------  ---------  --------- 
Net loss attributable to common                                             
 stockholders                    $ (41,471) $ (19,803) $ (88,814) $ (56,128)
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
  Net loss per share                                                        
   attributable to Class A and                                              
   Class B common stockholders,                                             
   basic and diluted             $   (0.67) $   (0.66) $   (2.06) $   (1.93)
                                 =========  =========  =========  ========= 
  Weighted-average shares used                                              
   to compute net loss per share                                            
   attributable to Class A and                                              
   Class B common stockholders      61,960     29,779     43,053     29,013 
                                 =========  =========  =========  ========= 
                                                                            
(1) Costs and expenses include                                              
 share-based compensation as                                                
 follows:                                                                   
                                                                            
  Costs of revenues              $     609  $     182  $   1,101  $     416 
  Research and development           1,300        306      2,227        751 
  Sales and marketing                  970        233      1,838        533 
  General and administrative         3,273        389      4,714      1,056 
                                                                            
                                                                            
                               Workday, Inc.                                
              Condensed Consolidated Statements of Cash Flows               
                               (in thousands)                               
                                (unaudited)                                 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                      October 31,           October 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
Cash flows from operating                                                   
 activities                                                                 
Net loss                         $ (41,310) $ (19,731) $ (88,246) $ (56,043)
Adjustments to reconcile net                                                
 loss to net cash provided by                                               
 (used in) operating activities:                                            
Depreciation and amortization        4,461      2,522     11,938      6,250 
Share-based compensation             6,152      1,110      9,880      2,755 
Amortization of deferred costs       2,750      1,824      8,336      5,095 
Donation of common stock to                                                 
 Workday Foundation                 11,250          -     11,250          - 
Other                                   11         15         41         45 
Changes in operating assets and                                             
 liabilities:                                                               
  Accounts receivable                7,382        477     (6,632)   (17,251)
  Deferred costs                    (4,673)    (3,029)   (11,426)    (7,142)
  Prepaid expenses and other                                                
   assets                           (3,395)    (2,149)    (7,744)    (4,151)
  Accounts payable                    (253)      (421)        73        391 
  Accrued and other liabilities      3,575      3,279     13,738      7,437 
  Unearned revenue                   4,692     10,592     64,066     55,482 
                                 ---------  ---------  ---------  --------- 
Net cash provided by (used in)                                              
 operating activities               (9,358)    (5,511)     5,274     (7,132)
                                                                            
Cash flows from investing                                                   
 activities                                                                 
Purchases of marketable                                  
                   
 securities                       (288,659)    (2,497)  (374,599)   (11,924)
Maturities of marketable                                                    
 securities                         19,845      5,005     72,785      8,606 
Purchase of cost method                                                     
 investment                              -          -          -     (1,000)
Purchases of property and                                                   
 equipment                            (801)    (2,663)    (6,803)    (3,742)
                                 ---------  ---------  ---------  --------- 
Net cash used in investing                                                  
 activities                       (269,615)      (155)  (308,617)    (8,060)
                                                                            
Cash flows from financing                                                   
 activities                                                                 
Proceeds of initial public                                                  
 offering, net of issuance costs   684,620          -    684,620          - 
Proceeds from exercise of stock                                             
 options                             2,955      1,028     10,085      4,198 
Proceeds from issuance of                                                   
 redeemable convertible                                                     
 preferred stock, net of                                                    
 issuance costs                          -     81,473          -     81,473 
Principal payments on capital                                               
 lease obligations                  (1,483)      (366)    (3,274)      (366)
Principal payments on capital                                               
 lease obligations with related                                             
 party                                (886)      (831)    (2,638)    (2,582)
                                 ---------  ---------  ---------  --------- 
Net cash provided by financing                                              
 activities                        685,206     81,304    688,793     82,723 
Effect of exchange rate changes          6          2          1          8 
                                 ---------  ---------  ---------  --------- 
Net increase in cash and cash                                               
 equivalents                       406,239     75,640    385,451     67,539 
Cash and cash equivalents at the                                            
 beginning of period                36,741     22,411     57,529     30,512 
                                 ---------  ---------  ---------  --------- 
Cash and cash equivalents at the                                            
 end of period                   $ 442,980  $  98,051  $ 442,980  $  98,051 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                               Workday, Inc.                                
                  Reconciliation of GAAP to Non-GAAP Data                   
                For the Three Months Ended October 31, 2012                 
                   (in thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                                       Equity               
                                                      Grant to    Non-GAAP  
                                        Share-Based    Workday       as     
                              GAAP     Compensation  Foundation   adjusted  
                           ---------   ------------  ----------  ---------  
Costs and expenses:                                                         
Costs of revenues          $  30,194   $       (609) $        -  $  29,585  
Research and development      28,075         (1,300)          -     26,775  
Sales and marketing           32,584           (970)          -     31,614  
General and administrative    22,633         (3,273)    (11,250)     8,110  
                                                                            
Operating loss               (40,868)         6,152      11,250    (23,466) 
Operating margin               (56.2%)          8.4%       15.5%     (32.3%)
                                                                            
Loss before provision for                                                   
 income taxes                (41,232)         6,152      11,250    (23,830) 
                                                                            
Provision for income taxes        78              -           -         78  
                                                                            
Net loss                   $ (41,310)  $      6,152  $   11,250  $ (23,908) 
                                                                            
Net loss per share                                                          
 attributable to common                                                     
 stockholders, for Class A                                                  
 and Class B, basic and                                                     
 diluted (1)               $   (0.67)  $       0.10  $     0.18  $   (0.39) 

 
(1) - Calculated based upon 61,960 basic and diluted weighted-average
shares of Class A and Class B common stock 


 
                                                                            
                                                                            
                               Workday, Inc.                                
                  Reconciliation of GAAP to Non-GAAP Data                   
                For the Three Months Ended October 31, 2011                 
                   (in thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                                                  Non-GAAP  
                                                    Share-Based      as     
                                          GAAP     Compensation   adjusted  
                                       ---------   ------------  ---------  
Costs and expenses:                                                         
Costs of revenues                      $  17,679   $       (182) $  17,497  
Research and development                  16,404           (306)    16,098  
Sales and marketing                       18,215           (233)    17,982  
General and administrative                 3,594           (389)     3,205  
                                                                            
Operating loss                           (19,442)         1,110    (18,332) 
Operating margin                           (53.3%)          3.0%     (50.3%)
                                                                            
Loss before provision for income taxes   (19,685)         1,110    (18,575) 
                                                                            
Provision for income taxes                    46              -         46  
                                                                            
Net loss                               $ (19,731)  $      1,110  $ (18,621) 
                                                                            
Net loss per share attributable to                                          
 common stockholders, for Class A and                                       
 Class B
, basic and diluted (1)        $   (0.66)  $       0.03  $   (0.63) 

 
(1) - Calculated based upon 29,779 basic and diluted weighted-average
shares of Class A and Class B common stock 


 
                                                                            
                                                                            
                               Workday, Inc.                                
                  Reconciliation of GAAP to Non-GAAP Data                   
                For the Nine Months Ended October 31, 2012                  
                   (in thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                                       Equity               
                                                      Grant to    Non-GAAP  
                                        Share-Based    Workday       as     
                              GAAP     Compensation  Foundation   adjusted  
                           ---------   ------------  ----------  ---------  
Costs and expenses:                                                         
Costs of revenues          $  83,549   $     (1,101) $        -  $  82,448  
Research and development      72,413         (2,227)          -     70,186  
Sales and marketing           87,051         (1,838)          -     85,213  
General and administrative    36,310         (4,714)    (11,250)    20,346  
                                                                            
Operating loss               (87,185)         9,880      11,250    (66,055) 
Operating margin               (45.4%)          5.1%        5.9%     (34.4%)
                                                                            
Loss before provision for                                                   
 income taxes                (88,221)         9,880      11,250    (67,091) 
                                                                            
Provision for income taxes        25              -           -         25  
                                                                            
Net loss                   $ (88,246)  $      9,880  $   11,250  $ (67,116) 
                                                                            
Net loss per share                                                          
 attributable to common                                                     
 stockholders, for Class A                                                  
 and Class B, basic and                                                     
 diluted (1)               $   (2.06)  $       0.23  $     0.26  $   (1.57) 
                                                                            
(1) - Calculated based upon 43,053 basic and diluted weighted-average       
 shares for Class A and Class B common stock                                
                                                                            
                                                                            
                                                                            
                               Workday, Inc.                                
                  Reconciliation of GAAP to Non-GAAP Data                   
                For the Nine Months Ended October 31, 2011                  
                   (in thousands, except per share data)                    
                                (unaudited)                                 
                                                                            
                                                                 Non-GAAP   
                                                   Share-Based      as      
                                        GAAP      Compensation   adjusted   
                                     ----------   ------------  ----------  
Costs and expenses:                                                         
Costs of revenues                    $   45,038   $       (416) $   44,622  
Research and development                 43,727           (751)     42,976  
Sales and marketing                      47,774           (533)     47,241  
General and administrative               10,083         (1,056)      9,027  
                                                                            
Operating loss                          (55,353)         2,756     (52,597) 
Operating margin                          (60.6%)          3.0%      (57.6%)
                                                                            
Loss before provision for income                                            
 taxes                                  (55,927)         2,756     (53,171) 
                                                                            
Provision for income taxes                  116              -         116  
                                                                            
Net loss                             $  (56,043)  $      2,756  $  (53,287) 
                                                                            
                                                                            
Net loss per share attributable to                                          
 common stockholders, for Class A                                           
 and Class B, basic and diluted (1)  $    (1.93)  $       0.09  $    (1.84) 
                                                                            
(1) - Calculated based upon 29,013 basic and diluted weighted-average       
 shares for Class A and Class B common stock                                
                                                                            
                                                                            
                                                                            
                               Workday, Inc.                                
                              Revenue by Type                               
                               (in thousands)                               
                                (unaudited)                                 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                      October 31,           October 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
Revenues:                                                                   
Subscription services            $  51,576  $  23,868  $ 130,698  $  59,603 
Professional services               21,042     12,582     61,440     31,666 
                                 ---------  ---------  ---------  --------- 
  Total revenues                 $  72,618  $  36,450  $ 192,138  $  91,269 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
Revenues:                                                                   
Subscription services                 71.0%      65.5%      68.0%      65.3%
Professional services                 29.0%      34.5%      32.0%      34.7%
                                 ---------  ---------  ---------  --------- 
  Total revenues                     100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  ========= 
                                                                            
                                     
                                       
                               Workday, Inc.                                
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows    
                       (A Non-GAAP Financial Measure)                       
                               (in thousands)                               
                                (unaudited)                                 
                                                                            
                                                             Three Months   
                                                                Ended       
                                                           October 31, 2012 
                                                          ----------------- 
GAAP cash flows from operating activities                 $          (9,358)
Capital expenditures                                                   (801)
Property and equipment acquired under capital lease                 (13,663)
                                                          ----------------- 
  Free cash flows                                         $         (23,822)
                                                          ================= 
                                                                            
                                                                            
                               Workday, Inc.                                
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows    
                       (A Non-GAAP Financial Measure)                       
                               (in thousands)                               
                                (unaudited)                                 
                                                                            
                                                           Trailing Twelve  
                                                             Months Ended   
                                                           October 31, 2012 
                                                          ----------------- 
GAAP cash flows from operating activities                 $          (1,369)
Capital expenditures                                                 (8,060)
Property and equipment acquired under capital lease                 (22,728)
                                                          ----------------- 
  Free cash flows                                         $         (32,157)
                                                          ================= 

 
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 loss, non-GAAP net loss, non-GAAP net
loss per share, non-GAAP operating margin, free cash flows and
trailing twelve-month free cash flows. Workday has provided a
reconciliation of each non-GAAP financial measure used in this
earnings release to the most directly comparable GAAP financial
measure. These non-GAAP financial measures, other than free cash
flows, differ from GAAP in that they exclude share-based compensation
and, for the third quarter of fiscal 2013, a one-time charge related
to the contribution of 500,000 shares of common stock to the Workday
Foundation. Free cash flows differ from GAAP cash flows from
operating activities in that it treats capital expenditures and
assets acquired under a capital lease as a reduction to cash flows.  
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 and the ability of operations to generate cash.
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, as they exclude expenses that are not reflective of ongoing
operating results. 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
future prospects in the same manner as management and in comparing
financial results across accounting periods and to those of peer
companies. Additionally, management believes information regarding
free cash flows provides investors and others with an important
perspective on the cash available to make strategic acquisitions and
investments, to fund ongoing operations and to fund other capital
expenditures.     
Management believes these non-GAAP financial measures are useful to
investors and others in assessing Workday's operating performance due
to the following factors: 


 
--  Share-based compensation. Although share-based compensation is an
    important aspect of the compensation of Workday's employees and
    executives, determining the fair value of certain of the share-based
    instruments we utilize involves a high degree of judgment and
    estimation and the expense recorded may bear little resemblance to the
    actual value realized upon the vesting or future exercise of the
    related share-based awards. Furthermore, unlike cash compensation, the
    value of stock options, which is an element of our ongoing share-based
    compensation expense, is determined using a complex formula that
    incorporates factors, such as market volatility, that are beyond our
    control. Management believes it is useful to exclude share-based
    compensation in order to better understand the long-term performance
    of our core business and to facilitate comparison of our results to
    those of peer companies.
--  Equity Grant to Workday Foundation. During the third quarter of fiscal
    2013, Workday granted 500,000 shares of common stock to the Workday
    Foundation. The Workday Foundation is a non-profit organization
    established to provide grants, humanitarian relief and employee
    matching contributions and support volunteerism and social development
    projects. This grant resulted in a one-time charge of $11.3 million,
    which was recorded to the General and administrative expenses line of
    the income statement. Management does not expect to make future grants
    of shares to the Foundation and therefore considers this charge
    non-recurring. As such, Management believes it is useful to exclude
    this one-time charge in order to better understand the ongoing
    expenses of our core business and to facilitate comparison of our
    results across periods.

  
Additionally, we believe that the non-GAAP financial measure, free cash
flows, is meaningful to investors because we review cash flows
generated from operations after deducting capital expenditures,
whether purchased or leased, due to the fact that these expenditures
are considered to be an ongoing operational component of our
business. The use of non-GAAP financial measures has 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. 
Investor Relations Contact:
Michael Haase 
Workday
(925) 951-9005
Michael.Haase@Workday.com 
Media Contact:
Eric Glass
Workday
(415) 432-3056
Eric.Glass@Workday.com 
 
 
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