Workday Announces Fiscal 2024 Fourth Quarter and Full Year Financial Results
- Strong fiscal fourth-quarter and full-year results for Workday, Inc. in 2024.
- Total revenues of $1.9 billion and $7.3 billion for the fourth quarter and full year, respectively.
- Subscription revenues up 18% and 19% year over year for the fourth quarter and full year.
- Operating cash flows increased by 30% year over year.
- Positive net income per share growth compared to the previous year.
- Total subscription revenue backlog up by 27% from the same period last year.
- Workday's CEO and executive chair express confidence in the company's performance and growth opportunities.
- Reiterated fiscal year 2025 subscription revenue guidance of $7.725 billion to $7.775 billion.
- Continued focus on innovation and investment initiatives to drive growth and optimize the business.
- Recent highlights include new leadership appointments, acquisitions, and strategic partnerships.
- Recognition as a Leader in the 2023 Gartner Magic Quadrant for Financial Planning Software and Best in KLAS 2024 in ERP.
- Earnings call scheduled to discuss financial results and outlook.
- Workday's strong financial position with cash, cash equivalents, and marketable securities of $7.8 billion as of January 31, 2024.
- None.
Insights
The reported fiscal fourth quarter and full-year results of Workday, Inc. present a significant uptick in both total and subscription revenues, indicating robust growth and market expansion. The 17% year-over-year increase in total revenues and 18% increase in subscription revenues for the fiscal fourth quarter, alongside a 30% increase in operating cash flows, reflect a strong financial performance and efficient cash management. This is particularly noteworthy given the broader economic context where many tech companies face challenges due to market saturation and competitive pressures.
The substantial improvement in operating income, turning from a loss to a gain and the increase in non-GAAP operating margin from 18.5% to 23.9% for the fourth quarter, suggest effective cost control and operational optimization. These improvements are indicative of a maturing business model that is beginning to scale effectively. Investors and stakeholders might view these results as a positive signal of the company's profitability trajectory.
The release of the valuation allowance on deferred tax assets, contributing to the GAAP net income per share, is a non-recurring event that investors should consider when evaluating the company's core operational performance. The share repurchase program demonstrates management's confidence in the company's valuation and its commitment to delivering shareholder value.
Workday's growth in subscription revenue, particularly the reported 27% year-over-year increase in total subscription revenue backlog, is indicative of strong demand for cloud-based financial management and human capital management solutions. This aligns with wider industry trends towards digital transformation and cloud adoption across businesses of various sizes. The company's strategic acquisitions, such as that of HiredScore and partnerships, like the one with Insperity, are likely to enhance its product offerings and competitive positioning in the talent management space.
The mention of new full platform customers and international performance growth points to successful market penetration and customer acquisition strategies. Workday's positioning in the Gartner Magic Quadrant and recognition by KLAS Research underscore its industry reputation and could contribute to sustained customer trust and loyalty, which are critical for long-term revenue stability in the Software as a Service (SaaS) market.
The financial results of Workday, Inc. are reflective of broader economic trends where investment in technology and automation is a priority for businesses seeking efficiency gains. The company's continued investment in innovation and its incremental approach to expanding its product capabilities may support enduring growth, even in a potentially tightening economic environment. Workday's reiteration of its fiscal year 2025 subscription revenue guidance suggests a stable outlook and may provide a degree of predictability for investors amidst economic uncertainties.
Moreover, the company's focus on margin expansion through scaling and optimizing the business could be an indicator of prudent financial stewardship, which is especially important in times of economic flux. The commitment to increased non-GAAP operating margin projections for fiscal year 2025 reflects a strategic balance between growth investments and profitability targets, a delicate equilibrium that can impact investor confidence and market valuations.
Fiscal Fourth Quarter Total Revenues of
Subscription Revenues of
Fiscal Year 2024 Total Revenues of
Subscription Revenues of
Operating Cash Flows of
Fiscal 2024 Fourth Quarter Results
- Total revenues were
$1.9 billion 17% from the fourth quarter of fiscal 2023. Subscription revenues were$1.8 billion 18% from the same period last year. - Operating income was
$79 million 4.1% of revenues, compared to an operating loss of$89 million 5.4% of revenues, in the same period last year. Non-GAAP operating income for the fourth quarter was$461 million 23.9% of revenues, compared to a non-GAAP operating income of$305 million 18.5% of revenues, in the same period last year.1,2 - Basic and diluted net income per share was
$4.52 $4.42 $0.49 $1.60 $1.57 $1.00 $0.99 $1.1 billion U.S. federal and state deferred tax assets, excluding certain state tax credits, in the fourth quarter of fiscal 2024.
Fiscal Year 2024 Results
- Total revenues were
$7.3 billion 17% from fiscal 2023. Subscription revenues were$6.6 billion 19% from the prior year. - Operating income was
$183 million 2.5% of revenues, compared to an operating loss of$222 million 3.6% of revenues, in fiscal 2023. Non-GAAP operating income was$1.7 billion 24.0% of revenues, compared to a non-GAAP operating income of$1.2 billion 19.5% of revenues, in the prior year.1,2 - Basic and diluted net income per share was
$5.28 $5.21 $1.44 $5.93 $5.84 $3.73 $3.64 $1.1 billion U.S. federal and state deferred tax assets, excluding certain state tax credits, in fiscal 2024. - Total subscription revenue backlog was
$20.9 billion 27% from the same period last year. 12-month subscription revenue backlog was$6.6 billion $11.7 billion 20% year over year. - Operating cash flows were
$2.1 billion $1.7 billion $1.9 billion $1.3 billion - Workday repurchased approximately 1.8 million shares of Class A common stock for
$423 million - Cash, cash equivalents, and marketable securities were
$7.8 billion
Comments on the News
"Workday's results this quarter are a testament to the strength of our value proposition and the durability of our business," said Carl Eschenbach, CEO, Workday. "We're seeing continued momentum with full platform customer wins and expansions within our base, strengthening international performance, growth of our partner ecosystem, and the seamless execution of nearly 19,000 Workmates across the globe – all setting us up for an incredible fiscal year 2025."
"Our relentless focus on innovation continues to fuel Workday's success while helping to enable our customers to transform how they manage their two most important assets – their people and money," said Aneel Bhusri, co-founder and executive chair, Workday. "As I step into my new role as executive chair, I look forward to working closely with Carl, the rest of our leadership team, and our product and technology organization to push the Workday platform to even greater heights and capitalize on the growth opportunity in front of us."
"Our fourth quarter and full-year fiscal 2024 results reflect the momentum building across our key investment initiatives," said Zane Rowe, CFO, Workday. "We are reiterating our fiscal year 2025 subscription revenue guidance of
Recent Highlights
- Workday officially named Carl Eschenbach CEO effective February 1, 2024. Aneel Bhusri remains integral to the organization as co-founder and executive chair.
- Workday announced it has entered into a definitive agreement to acquire HiredScore, a leading provider of AI-powered talent orchestration solutions.
- Workday announced that its Board of Directors approved a new share repurchase program, with a term of 18 months, to repurchase up to an additional
$500 million - Workday announced new full platform customers for Workday Financial Management and Workday Human Capital Management (HCM), including HHS, Randstad, UHS of
Delaware , and VXI Global Solutions. - Workday and Insperity announced an exclusive strategic partnership and plans to jointly develop, brand, market, and sell a preeminent full-service HR solution for small and midsize businesses.
- Workday continued to build its global leadership bench, naming David Somers Chief Product Officer, Chikara Furuichi President of
Japan , and Lynn Martin head of the Workday Federal business. - Workday was named a Leader in the 2023 Gartner® Magic Quadrant™ for Financial Planning Software5 for the second time since the category's inception last year.
- KLAS Research named Workday as Best in KLAS 2024 in enterprise resource planning (ERP) for the seventh consecutive year.
Earnings Call Details
Workday plans to host a conference call today to review its fiscal 2024 fourth quarter and full year financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.
Workday uses the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
1 Non-GAAP operating income 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. |
2 Operating margin and net income (loss) per share are calculated based upon the respective underlying, non-rounded data. |
3 Non-GAAP net income per share excludes share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, and income tax effects. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details. |
4 Free cash flows are defined as net cash provided by (used in) operating activities minus total capital expenditures. See the section titled "About Non-GAAP Financial Measures" in the accompanying financial tables for further details. |
5 Gartner Magic Quadrant for Financial Planning Software, Regina Crowder, Matthew Mowrey, Vaughan D Archer, 5 December 2023. |
Gartner Disclaimer
Gartner does not endorse any vendor, product or service depicted in its 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 is a registered trademark and service mark, and MAGIC QUADRANT is a registered trademark of Gartner, Inc., and/or its affiliates in the
About Workday
Workday is a leading enterprise platform that helps organizations manage their most important assets – their people and money. The Workday platform is built with AI at the core to help customers elevate people, supercharge work, and move their business forever forward. Workday is used by more than 10,000 organizations around the world and across industries – from medium-sized businesses to more than
© 2024 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.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to Workday's financial results as determined in accordance with
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding Workday's planned acquisition of HiredScore, Workday's partnership with Insperity and expected offerings, our intended share repurchases, Workday's full-year fiscal 2025 subscription revenues and non-GAAP operating margin, growth and expansion, momentum, demand, strategy, 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) 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; (ii) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (iii) privacy concerns and evolving domestic or foreign laws and regulations; (iv) the impact of continuing global economic and geopolitical volatility on our business, as well as on our customers, prospects, partners, and service providers; (v) any loss of key employees or the inability to attract, train, and retain highly skilled employees; (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) our reliance on our network of partners to drive additional growth of our revenues; (viii) the regulatory, economic, and political risks associated with our domestic and international operations; (ix) adoption of our applications and services by customers and individuals, including any new features, enhancements, and modifications, as well as our customers' and users' satisfaction with the deployment, training, and support services they receive; (x) the regulatory risks related to new and evolving technologies such as AI and our ability to realize a return on our development efforts; (xi) our ability to realize the expected business or financial benefits of any acquisitions of or investments in companies, including HiredScore; (xii) the risk that the HiredScore transaction may not be completed in a timely manner or at all; (xiii) negative effects of the announcement or consummation of the HiredScore transaction on Workday's business operations, operating results, or share price; (xiv) delays or reductions in information technology spending; and (xv) 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 most recent report on Form 10-Q or Form 10-K and other reports that we have filed and will 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, except as required by law.
Any unreleased services, features, or functions referenced in this document, our website, or other press releases or public statements that are not currently available are subject to change at Workday's discretion and may not be delivered as planned or at all. Customers who purchase Workday services should make their purchase decisions based upon services, features, and functions that are currently available.
Workday, Inc. Condensed Consolidated Balance Sheets (in millions) (unaudited) | |||
As of January 31, | |||
2024 | 2023 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 2,012 | $ 1,886 | |
Marketable securities | 5,801 | 4,235 | |
Trade and other receivables, net | 1,639 | 1,570 | |
Deferred costs | 232 | 191 | |
Prepaid expenses and other current assets | 255 | 226 | |
Total current assets | 9,939 | 8,108 | |
Property and equipment, net | 1,234 | 1,201 | |
Operating lease right-of-use assets | 289 | 249 | |
Deferred costs, noncurrent | 509 | 421 | |
Acquisition-related intangible assets, net | 233 | 306 | |
Deferred tax assets | 1,065 | 13 | |
Goodwill | 2,846 | 2,840 | |
Other assets | 337 | 348 | |
Total assets | $ 16,452 | $ 13,486 | |
Liabilities and stockholders' equity | |||
Current liabilities: | |||
Accounts payable | $ 78 | $ 154 | |
Accrued expenses and other current liabilities | 287 | 260 | |
Accrued compensation | 544 | 564 | |
Unearned revenue | 4,057 | 3,559 | |
Operating lease liabilities | 89 | 91 | |
Total current liabilities | 5,055 | 4,628 | |
Debt, noncurrent | 2,980 | 2,976 | |
Unearned revenue, noncurrent | 70 | 75 | |
Operating lease liabilities, noncurrent | 227 | 182 | |
Other liabilities | 38 | 40 | |
Total liabilities | 8,370 | 7,901 | |
Stockholders' equity: | |||
Additional paid-in capital | 10,400 | 8,829 | |
Treasury stock | (608) | (185) | |
Accumulated other comprehensive income (loss) | 21 | 53 | |
Accumulated deficit | (1,731) | (3,112) | |
Total stockholders' equity | 8,082 | 5,585 | |
Total liabilities and stockholders' equity | $ 16,452 | $ 13,486 | |
Workday, Inc. Condensed Consolidated Statements of Operations (in millions, except number of shares which are reflected in thousands and per share data) (unaudited) | |||||||
Three Months Ended January 31, | Year Ended January 31, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Revenues: | |||||||
Subscription services | $ 1,760 | $ 1,496 | $ 6,603 | $ 5,567 | |||
Professional services | 162 | 150 | 656 | 649 | |||
Total revenues | 1,922 | 1,646 | 7,259 | 6,216 | |||
Costs and expenses (1): | |||||||
Costs of subscription services | 272 | 274 | 1,031 | 1,011 | |||
Costs of professional services | 189 | 180 | 740 | 704 | |||
Product development | 635 | 615 | 2,464 | 2,271 | |||
Sales and marketing | 558 | 490 | 2,139 | 1,848 | |||
General and administrative | 189 | 176 | 702 | 604 | |||
Total costs and expenses | 1,843 | 1,735 | 7,076 | 6,438 | |||
Operating income (loss) | 79 | (89) | 183 | (222) | |||
Other income (expense), net | 59 | 11 | 173 | (38) | |||
Income (loss) before provision for (benefit from) income taxes | 138 | (78) | 356 | (260) | |||
Provision for (benefit from) income taxes | (1,050) | 48 | (1,025) | 107 | |||
Net income (loss) | $ 1,188 | $ (126) | $ 1,381 | $ (367) | |||
Net income (loss) per share, basic | $ 4.52 | $ (0.49) | $ 5.28 | $ (1.44) | |||
Net income (loss) per share, diluted | $ 4.42 | $ (0.49) | $ 5.21 | $ (1.44) | |||
Weighted-average shares used to compute net income (loss) per share, basic | 263,102 | 257,322 | 261,344 | 254,819 | |||
Weighted-average shares used to compute net income (loss) per share, diluted | 268,843 | 257,322 | 265,285 | 254,819 | |||
(1) Costs and expenses include share-based compensation expenses as follows: | |||||||
Three Months Ended January 31, | Year Ended January 31, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Costs of subscription services | $ 31 | $ 29 | $ 120 | $ 106 | |||
Costs of professional services | 28 | 30 | 116 | 111 | |||
Product development | 159 | 169 | 653 | 619 | |||
Sales and marketing | 70 | 69 | 282 | 249 | |||
General and administrative | 58 | 64 | 245 | 210 | |||
Total share-based compensation expenses | $ 346 | $ 361 | $ 1,416 | $ 1,295 | |||
Workday, Inc. Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) | |||||||
Three Months Ended January 31, | Year Ended January 31, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ 1,188 | $ (126) | $ 1,381 | $ (367) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 72 | 89 | 282 | 364 | |||
Share-based compensation expenses | 346 | 361 | 1,416 | 1,295 | |||
Amortization of deferred costs | 57 | 48 | 213 | 175 | |||
Non-cash lease expense | 24 | 24 | 96 | 92 | |||
(Gains) losses on investments | 3 | 11 | 19 | 31 | |||
Accretion of discounts on marketable debt securities, net | (38) | (26) | (149) | (42) | |||
Deferred income taxes | (1,063) | — | (1,058) | 4 | |||
Other | 7 | 29 | (17) | 57 | |||
Changes in operating assets and liabilities, net of business combinations: | |||||||
Trade and other receivables, net | (415) | (519) | (87) | (319) | |||
Deferred costs | (159) | (129) | (342) | (293) | |||
Prepaid expenses and other assets | (9) | 17 | 69 | (14) | |||
Accounts payable | (9) | 65 | (72) | 86 | |||
Accrued expenses and other liabilities | 124 | 95 | (95) | 136 | |||
Unearned revenue | 868 | 755 | 493 | 452 | |||
Net cash provided by (used in) operating activities | 996 | 694 | 2,149 | 1,657 | |||
Cash flows from investing activities: | |||||||
Purchases of marketable securities | (1,404) | (1,532) | (6,150) | (7,183) | |||
Maturities of marketable securities | 923 | 1,181 | 4,519 | 4,949 | |||
Sales of marketable securities | 51 | 51 | 144 | 104 | |||
Owned real estate projects | (2) | (4) | (4) | (4) | |||
Capital expenditures, excluding owned real estate projects | (46) | (73) | (228) | (360) | |||
Business combinations, net of cash acquired | — | — | (8) | — | |||
Purchase of other intangible assets | — | — | (10) | (1) | |||
Purchases of non-marketable equity and other investments | (5) | (3) | (16) | (23) | |||
Sales and maturities of non-marketable equity and other investments | 2 | — | 2 | 12 | |||
Net cash provided by (used in) investing activities | (481) | (380) | (1,751) | (2,506) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of debt, net of debt discount | — | — | — | 2,978 | |||
Repayments and extinguishment of debt | — | — | — | (1,844) | |||
Payments for debt issuance costs | — | — | — | (7) | |||
Repurchases of common stock | (139) | (75) | (423) | (75) | |||
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld | 72 | 67 | 155 | 152 | |||
Net cash provided by (used in) financing activities | (67) | (8) | (268) | 1,204 | |||
Effect of exchange rate changes | — | 1 | (1) | (1) | |||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 448 | 307 | 129 | 354 | |||
Cash, cash equivalents, and restricted cash at the beginning of period | 1,576 | 1,588 | 1,895 | 1,541 | |||
Cash, cash equivalents, and restricted cash at the end of period | $ 2,024 | $ 1,895 | $ 2,024 | $ 1,895 | |||
Workday, Inc.
Reconciliations of GAAP to Non-GAAP Data
Reconciliations of our GAAP to non-GAAP operating results are included in the following tables (in millions, except percentages and per share data; operating margin and net income (loss) per share are calculated based upon the respective underlying, non-rounded data). See the section titled "About Non-GAAP Financial Measures" below for further details.
Three Months Ended January 31, 2024 | |||||||||||
GAAP | Share-Based | Employer | Amortization | Income Tax | Non-GAAP | ||||||
Operating income (loss) | $ 79 | $ 346 | $ 20 | $ 16 | $ — | $ 461 | |||||
Operating margin | 4.1 % | 18.0 % | 1.0 % | 0.8 % | — % | 23.9 % | |||||
Net income (loss) | $ 1,188 | $ 346 | $ 20 | $ 16 | $ (1,149) | $ 421 | |||||
Net income (loss) per share, basic (1) | $ 4.52 | $ 1.31 | $ 0.07 | $ 0.06 | $ (4.36) | $ 1.60 | |||||
Net income (loss) per share, diluted (1) | $ 4.42 | $ 1.29 | $ 0.07 | $ 0.06 | $ (4.27) | $ 1.57 | |||||
Three Months Ended January 31, 2023 | |||||||||||
GAAP | Share-Based | Employer | Amortization | Income Tax | Non-GAAP | ||||||
Operating income (loss) | $ (89) | $ 361 | $ 12 | $ 21 | $ — | $ 305 | |||||
Operating margin | (5.4) % | 21.9 % | 0.7 % | 1.3 % | — % | 18.5 % | |||||
Net income (loss) | $ (126) | $ 361 | $ 12 | $ 21 | $ (12) | $ 256 | |||||
Net income (loss) per share, basic (1) | $ (0.49) | $ 1.40 | $ 0.05 | $ 0.08 | $ (0.04) | $ 1.00 | |||||
Net income (loss) per share, diluted (1) | $ (0.49) | $ 1.40 | $ 0.05 | $ 0.08 | $ (0.05) | $ 0.99 | |||||
Year Ended January 31, 2024 | |||||||||||
GAAP | Share-Based | Employer | Amortization | Income Tax | Non-GAAP | ||||||
Operating income (loss) | $ 183 | $ 1,416 | $ 66 | $ 75 | $ — | $ 1,740 | |||||
Operating margin | 2.5 % | 19.5 % | 0.9 % | 1.1 % | — % | 24.0 % | |||||
Net income (loss) | $ 1,381 | $ 1,416 | $ 66 | $ 75 | $ (1,389) | $ 1,549 | |||||
Net income (loss) per share, basic (1) | $ 5.28 | $ 5.42 | $ 0.25 | $ 0.28 | $ (5.30) | $ 5.93 | |||||
Net income (loss) per share, diluted (1) | $ 5.21 | $ 5.34 | $ 0.25 | $ 0.28 | $ (5.24) | $ 5.84 | |||||
Year Ended January 31, 2023 | |||||||||||
GAAP | Share-Based | Employer | Amortization | Income Tax | Non-GAAP | ||||||
Operating income (loss) | $ (222) | $ 1,295 | $ 52 | $ 85 | $ — | $ 1,210 | |||||
Operating margin | (3.6) % | 20.8 % | 0.9 % | 1.4 % | — % | 19.5 % | |||||
Net income (loss) | $ (367) | $ 1,295 | $ 52 | $ 85 | $ (116) | $ 949 | |||||
Net income (loss) per share, basic (1) | $ (1.44) | $ 5.08 | $ 0.21 | $ 0.33 | $ (0.45) | $ 3.73 | |||||
Net income (loss) per share, diluted (1) | $ (1.44) | $ 5.08 | $ 0.21 | $ 0.33 | $ (0.54) | $ 3.64 | |||||
(1) | For the three months ended January 31, 2024, GAAP and non-GAAP net income per share were both calculated based upon 263,102 basic and 268,843 diluted weighted-average shares of common stock. |
For the three months ended January 31, 2023, GAAP net loss per share was calculated based upon 257,322 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share was calculated based upon 257,322 basic and 258,367 diluted weighted-average shares of common stock. | |
For the fiscal year ended January 31, 2024, GAAP and non-GAAP net income per share were both calculated based upon 261,344 basic and 265,285 diluted weighted-average shares of common stock. | |
For the fiscal year ended January 31, 2023, GAAP net loss per share was calculated based upon 254,819 basic and diluted weighted-average shares of common stock. Non-GAAP net income per share was calculated based upon 254,819 basic and 261,641 diluted weighted-average shares of common stock. The numerator used to compute non-GAAP diluted net income per share was increased by our convertible senior notes in accordance with the if-converted method. | |
(2) | 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 2024 and 2023, the non-GAAP tax rate was the year ended January 31, 2023, included in the per share amount was a dilution impact of conversion of GAAP diluted net loss per share to non-GAAP diluted net income per share. |
Reconciliation of our GAAP cash flows from operating activities to non-GAAP free cash flow is as follows (in millions). See the section titled "About Non-GAAP Financial Measures" below for further details.
Three Months Ended January 31, | Year Ended January 31, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Net cash provided by (used in) operating activities | $ 996 | $ 694 | $ 2,149 | $ 1,657 | |||
Less: Total capital expenditures (1) | (48) | (77) | (232) | (364) | |||
Free cash flows | $ 948 | $ 617 | $ 1,917 | $ 1,293 | |||
(1) | For the three months ended January 31, 2024, and 2023, total capital expenditures consisted of Capital expenditures, excluding owned real estate projects of |
For the fiscal year ended January 31, 2024, and 2023, total capital expenditures consisted of Capital expenditures, excluding owned real estate projects of |
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding Workday's results, we have disclosed the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) per share, and 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. 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. Free cash flows differ from GAAP cash flows from operating activities in that it treats total capital expenditures 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. 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.
- Employer payroll tax-related items on employee stock transactions. We exclude the employer payroll tax-related items on employee stock transactions in order to show the full effect that excluding share-based compensation expenses has on our operating results. Similar to share-based compensation expenses, this tax expense is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business.
- Amortization of acquisition-related intangible assets. 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 the 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, and amortization of acquisition-related intangible assets. 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 2025 and 2024, 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, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.
Additionally, with regards to free cash flows, Workday's management believes that reducing cash provided by (used in) operating activities by capital expenditures is meaningful to investors and others because it provides an enhanced view of cash flow generation from the ongoing operations of our business, and it balances operating results, cash management, and capital efficiency.
The use of the non-GAAP measures of non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) per share, and free cash flows have certain limitations as they do not reflect all items of expense or cash 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.
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SOURCE Workday Inc.
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