News

Workday Announces Fiscal 2020 Second Quarter Financial Results

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Second
Quarter Total Revenues of $887.8 Million, Up 32.2% Year Over Year�

Subscription
Revenue of $757.2 Million, Up 33.9% Year Over Year�

Subscription
Revenue Backlog of $7.03 Billion, Up 27.2% Year Over Year

SINGAPORE -�Media OutReach�-�5 September 2019�-�Workday, Inc.�(NASDAQ: WDAY), a leader in enterprise cloud
applications for�finance�and�human resources, today announced results for the fiscal 2020
second quarter ended July 31, 2019.

�

Fiscal 2020 Second
Quarter Results

  • Total revenues were $887.8 million, an
    increase of 32.2% from the second quarter of fiscal 2019. Subscription
    revenue was $757.2 million, an increase of 33.9% from the same period last
    year.
    �
  • Operating loss was $122.5 million, or negative
    13.8% of revenues, compared to an operating loss of $89.0 million, or
    negative 13.2% of revenues, in the same period last year. Non-GAAP
    operating income for the second quarter was $117.5 million, or 13.2% of
    revenues, compared to a non-GAAP operating income of $68.1 million, or
    10.1% of revenues, in the same period last year.1
    �
  • Net loss per basic and diluted share was
    $0.53, compared to a net loss per basic and diluted share of $0.40 in the
    second quarter of fiscal 2019. Non-GAAP net income per diluted share was
    $0.44 compared to a non-GAAP net income per diluted share of $0.31 in the
    same period last year.2
    �
  • Operating cash flows were $100.3 million
    compared to $57.6 million in the same period last year.
    �
  • Cash, cash equivalents, and marketable
    securities were $1.93 billion as of July 31, 2019. Unearned revenues were
    $1.89 billion, a 27.1% increase from the same period last year.


Comments on the
News

"It was a strong quarter, with continued global customer momentum across
the Fortune 500 and Global 2,000, as more organizations look to Workday for the
ability to plan, execute, and analyze in one system powered by machine
learning. In addition, we celebrated one year with Adaptive Insights and
continue to make great progress on our integration vision," said Aneel Bhusri, co-founder and CEO, Workday.
"As we move into the second half of the year, we are continuing to invest in
areas that leverage our strengths and open new opportunities."

�

"We delivered strong Q2 results with subscription revenue up 34%, along
with solid operating margins and cash flow," said Robynne Sisco, co-president and chief financial officer, Workday.
"Based on our second quarter results, we are raising our fiscal 2020
subscription revenue outlook and now expect subscription revenue of $3.06 to
$3.07 billion.�We expect our third quarter subscription revenue to be
between $783 and $785 million. We continue to prioritize investing in long-term
growth initiatives, while delivering solid operating margins and cash flow over
time."

�

Recent Highlights

  • Workday�opened�its new headquarters in Pleasanton,
    Calif. The new 410,000-square-foot, six-story building was designed to
    encourage collaboration and will accommodate 2,200 employees as well as
    Workday's new customer center.��
    �
  • Workday�celebrated�the one-year anniversary of its
    acquisition of Adaptive Insights. In the last year, the two organizations
    have seen continued business planning momentum, including the addition of
    more than 800 new Adaptive Insights customers, machine learning
    advancements, the completion of the first phase of the Adaptive Insights
    integration with Workday as part of the Power of One, and record
    attendance at Adaptive Live, the company's annual customer
    conference.�
    �
  • Workday�published�its commitments to ethical artificial
    intelligence (AI), which includes six principles that guide how it
    develops machine learning -- a subset of AI -- for the enterprise
    responsibly.�
    �
  • Fast Company�recognized Workday on its inaugural list
    of the�    50 Best Workplaces For
    Innovators    , which
    honors organizations that demonstrate a deep commitment to encouraging
    innovation at all levels.
    �
  • Workday
    became the�    first�organization to adhere to the EU Cloud
    Code of Conduct (CoC) by SCOPE Europe, underscoring the company's
    continued commitment to global data protection.
    �
  • Workday
    appointed Carolyn Horne as president of the EMEA region and David Webster
    as president of the APJ region. In addition, Workday promoted Josh
    DeFigueiredo to chief security officer.�
    �
  • Workday
    released its�    2019 Global Impact Report, which provides an inside look into the
    company's efforts to make a positive impact on the world -- from
    implementing sustainable practices, to creating a better place to work,
    and empowering positive social impact.

�

Additional
Information

  • Please visit the Workday blog for detailed results: Workday
    Announces Fiscal 2020 Second Quarter Financial Results


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

�

July 31, 2019

�

January 31, 2019

Assets

�

�

�

Current assets:

�

�

�

Cash and cash equivalents

$

619,514

�

�

$

638,554

�

Marketable securities

1,307,006

�

�

1,139,864

�

Trade and other receivables, net

613,425

�

�

704,680

�

Deferred costs

85,557

�

�

80,809

�

�

Prepaid expenses and other current assets

163,530

�

�

136,689

�

�

Total current assets

2,789,032

�

�

2,700,596

�

�

Property and equipment, net

919,523

�

�

796,907

�

�

Operating lease right-of-use
assets

294,824

�

�

--

�

�

Deferred costs, noncurrent

182,580

�

�

183,518

�

�

Acquisition-related intangible
assets, net

277,953

�

�

313,240

�

�

Goodwill

1,389,349

�

�

1,379,125

�

�

Other assets

138,895

�

�

147,360

�

�

Total assets

$

5,992,156

�

�

$

5,520,746

�

�

Liabilities and stockholders'
equity

�

�

�

�

Current liabilities:

�

�

�

�

Accounts payable

$

32,540

�

�

$

29,093

�

�

Accrued expenses and other current
liabilities

114,494

�

�

123,542

�

�

Accrued compensation

192,064

�

�

207,924

�

�

Unearned revenue

1,796,423

�

�

1,837,618

�

�

Operating lease liabilities

65,554

�

�

--

�

�

Current portion of convertible senior
notes, net

1,233,189

�

�

232,514

�

�

Total current liabilities

3,434,264

�

�

2,430,691

�

�

Convertible senior notes, net

--

�

�

972,264

�

�

Unearned revenue, noncurrent

89,219

�

�

111,652

�

�

Operating lease liabilities,
noncurrent

243,863

�

�

--

�

�

Other liabilities

14,525

�

�

47,697

�

�

Total liabilities

3,781,871

�

�

3,562,304

�

�

Stockholders' equity:

�

�

�

�

Common stock

227

�

�

221

�

�

Additional paid-in capital

4,561,272

�

�

4,105,334

�

�

Accumulated other comprehensive income
(loss)

32,458

�

�

(809

)

�

Accumulated deficit

(2,383,672

)

�

(2,146,304

)

�

Total stockholders' equity

2,210,285

�

�

1,958,442

�

�

Total liabilities and stockholders'
equity

$

5,992,156

�

�

$

5,520,746

�

�

Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

�

Three Months Ended July 31,

�

Six Months Ended July 31,

�

2019

�

2018

�

2019

�

2018

Revenues:

�

�

�

�

�

�

�

Subscription services

$

757,155

�

�

$

565,659

�

�

$

1,458,179

�

�

$

1,087,808

�

Professional services

130,597

�

�

106,061

�

�

254,628

�

�

202,555

�

Total revenues

887,752

�

�

671,720

�

�

1,712,807

�

�

1,290,363

�

Costs and expenses�(1):

�

�

�

�

�

�

�

Costs of subscription services

121,161

�

�

87,523

�

�

233,630

�

�

167,768

�

Costs of professional services

145,173

�

�

112,707

�

�

275,923

�

�

210,433

�

Product development

378,122

�

�

292,840

�

�

725,953

�

�

556,424

�

Sales and marketing

280,200

�

�

202,464

�

�

553,136

�

�

395,235

�

General and administrative

85,593

�

�

65,168

�

�

170,048

�

�

120,749

�

Total costs and expenses

1,010,249

�

�

760,702

�

�

1,958,690

�

�

1,450,609

�

Operating loss

(122,497

)

�

(88,982

)

�

(245,883

)

�

(160,246

)

Other income (expense), net

(106

)

�

1,613

�

�

7,035

�

�

(2,235

)

Loss before provision for
(benefit from) income taxes

(122,603

)

�

(87,369

)

�

(238,848

)

�

(162,481

)

Provision for (benefit from)
income taxes

(1,891

)

�

(1,213

)

�

(1,861

)

�

(1,915

)

Net loss

$

(120,712

)

�

$

(86,156

)

�

$

(236,987

)

�

$

(160,566

)

Net loss per share, basic and
diluted

$

(0.53

)

�

$

(0.40

)

�

$

(1.05

)

�

$

(0.75

)

Weighted-average shares used to
compute net loss per share, basic and diluted

226,392

�

�

215,932

�

�

224,857

�

�

214,517

�

�

(1)

�

Costs and expenses include
share-based compensation expenses as follows:

�

�

�

�

�

�

Costs of subscription services

$

12,001

�

�

$

8,521

�

�

$

22,416

�

�

$

16,398

�

�

Costs of professional services

18,991

�

�

12,518

�

�

35,141

�

�

23,310

�

�

Product development

105,758

�

�

75,354

�

�

196,995

�

�

143,865

�

�

Sales and marketing

42,690

�

�

29,367

�

�

81,544

�

�

54,979

�

�

General and administrative

29,781

�

�

21,303

�

�

58,360

�

�

41,170

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�


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

�

Three Months Ended July 31,

�

Six Months Ended July 31,

�

2019

�

2018

�

2019

�

2018

Cash flows from operating activities

�

�

�

�

�

�

�

Net loss

$

(120,712

)

�

$

(86,156

)

�

$

(236,987

)

�

$

(160,566

)

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

�

�

�

�

�

�

�

Depreciation and amortization

67,754

�

�

42,226

�

�

128,919

�

�

80,890

�

Share-based compensation expenses

208,912

�

�

147,063

�

�

394,147

�

�

279,722

�

Amortization of deferred costs

22,002

�

�

17,061

�

�

42,882

�

�

33,421

�

Amortization of debt discount and issuance costs

14,301

�

�

17,490

�

�

25,888

�

�

35,629

�

Other

11,401

�

�

(4,894

)

�

20,377

�

�

(14,183

)

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

�

�

�

�

�

�

�

Trade and other receivables, net

(73,437

)

�

(104,758

)

�

83,942

�

�

63,944

�

Deferred costs

(28,207

)

�

(23,943

)

�

(46,692

)

�

(36,549

)

Prepaid expenses and other assets

(1,679

)

�

(5,446

)

�

(6,786

)

�

3,042

�

Accounts payable

1,047

�

�

5,987

�

�

2,550

�

�

13,941

�

Accrued expenses and other liabilities

(56,524

)

�

(15,182

)

�

(35,121

)

�

(3,555

)

Unearned revenue

55,461

�

�

68,168

�

�

(63,637

)

�

(53,887

)

Net cash provided by (used in) operating
activities

100,319

�

�

57,616

�

�

309,482

�

�

241,849

�

Cash flows from investing activities

�

�

�

�

�

�

�

Purchases of marketable securities

(582,848

)

�

(526,216

)

�

(1,053,902

)

�

(1,434,342

)

Maturities of marketable securities

385,710

�

�

655,205

�

�

845,807

�

�

1,341,881

�

Sales of marketable securities

4,551

�

�

914,938

�

�

55,499

�

�

942,297

�

Owned real estate projects

(34,149

)

�

(49,537

)

�

(73,783

)

�

(88,770

)

Capital expenditures, excluding owned real estate
projects

(75,576

)

�

(53,346

)

�

(141,111

)

�

(102,208

)

Business combinations, net of cash acquired

(12,885

)

�

(26,737

)

�

(12,885

)

�

(26,737

)

Purchase of other intangible assets

--

�

�

(1,000

)

�

--

�

�

(1,000

)

Purchases of non-marketable equity and other
investments

(5,516

)

�

(1,000

)

�

(7,716

)

�

(3,400

)

Other

(32

)

�

--

�

�

(9

)

�

--

�

Net cash provided by (used in) investing
activities

(320,745

)

�

912,307

�

�

(388,100

)

�

627,721

�

Cash flows from financing activities

�

�

�

�

�

�

�

Payments on convertible senior notes

(27

)

�

(350,005

)

�

(27

)

�

(350,005

)

Proceeds from issuance of common stock from employee
equity plans

58,085

�

�

38,686

�

�

61,540

�

�

41,297

�

Other

(107

)

�

(59

)

�

(200

)

�

(116

)

Net cash provided by (used in) financing
activities

57,951

�

�

(311,378

)

�

61,313

�

�

(308,824

)

Effect of exchange rate changes

75

�

�

(162

)

�

(252

)

�

(582

)

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

(162,400

)

�

658,383

�

�

(17,557

)

�

560,164

�

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

787,046

�

�

1,037,435

�

�

642,203

�

�

1,135,654

�

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

$

624,646

�

�

$

1,695,818

�

�

$

624,646

�

�

$

1,695,818

�

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended July 31, 2019
(in thousands, except percentages and per share data)
(unaudited)

�

GAAP

�

Share-Based�
Compensation�
Expenses

�

Other�
Operating�
Expenses�(2)

�

Amortization�
of Debt�
Discount and�
Issuance�
Costs

�

Income Tax�
Effects�(3)

�

Non-GAAP

Costs and expenses:

�

�

�

�

�

�

�

�

�

�

�

Costs of subscription services

$

121,161

�

�

$

(12,001

)

�

$

(11,739

)

�

$

--

�

�

$

--

�

�

$

97,421

�

Costs of professional services

145,173

�

�

(18,991

)

�

(1,233

)

�

--

�

�

--

�

�

124,949

�

Product development

378,122

�

�

(105,758

)

�

(5,380

)

�

--

�

�

--

�

�

266,984

�

Sales and marketing

280,200

�

�

(42,690

)

�

(10,449

)

�

--

�

�

--

�

�

227,061

�

General and administrative

85,593

�

�

(29,781

)

�

(2,021

)

�

--

�

�

--

�

�

53,791

�

Operating income (loss)

(122,497

)

�

209,221

�

�

30,822

�

�

--

�

�

--

�

�

117,546

�

Operating margin

(13.8

)%

�

23.6

%

�

3.4

%

�

--

%

�

--

%

�

13.2

%

Other income (expense), net

(106

)

�

--

�

�

--

�

�

14,301

�

�

--

�

�

14,195

�

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

(122,603

)

�

209,221

�

�

30,822

�

�

14,301

�

�

--

�

�

131,741

�

Provision for (benefit from)
income taxes

(1,891

)

�

--

�

�

--

�

�

--

�

�

24,287

�

�

22,396

�

Net income (loss)

$

(120,712

)

�

$

209,221

�

�

$

30,822

�

�

$

14,301

�

�

$

(24,287

)

�

$

109,345

�

Net income (loss) per share�(1)

$

(0.53

)

�

$

0.92

�

�

$

0.14

�

�

$

0.06

�

�

$

(0.15

)

�

$

0.44

�

�

(1)

�

GAAP net loss per share is
calculated based upon 226,392 basic and diluted weighted-average shares of
common stock. Non-GAAP net income per share is calculated based upon 247,748
diluted weighted-average shares of common stock.

(2)

�

Other operating expenses
include amortization of acquisition-related intangible assets of $19.5
million and total employer payroll tax-related items on employee stock
transactions of $11.3 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 interim reporting periods. For fiscal
2020, the projected non-GAAP tax rate is 17%.

�

�

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended July 31, 2018
(in thousands, except percentages and per share data)
(unaudited)

�

GAAP

�

Share-Based�
Compensation�
Expenses

�

Other�
Operating�
Expenses�(2)

�

Amortization�
of Debt�
Discount and�
Issuance�
Costs

�

Income Tax�
Effects�(3)

�

Non-GAAP

�

Costs and expenses:

�

�

�

�

�

�

�

�

�

�

�

�

Costs of subscription services

$

87,523

�

�

$

(8,521

)

�

$

(3,787

)

�

$

--

�

�

$

--

�

�

$

75,215

�

Costs of professional services

112,707

�

�

(12,518

)

�

(519

)

�

--

�

�

--

�

�

99,670

�

�

Product development

292,840

�

�

(75,354

)

�

(3,960

)

�

--

�

�

--

�

�

213,526

�

�

Sales and marketing

202,464

�

�

(29,367

)

�

(1,039

)

�

--

�

�

--

�

�

172,058

�

�

General and administrative

65,168

�

�

(21,303

)

�

(731

)

�

--

�

�

--

�

�

43,134

�

�

Operating income (loss)

(88,982

)

�

147,063

�

�

10,036

�

�

--

�

�

--

�

�

68,117

�

�

Operating margin

(13.2

)%

�

21.9

%

�

1.4

%

�

--

%

�

--

%

�

10.1

%

�

Other income (expense), net

1,613

�

�

--

�

�

--

�

�

17,490

�

�

--

�

�

19,103

�

�

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

(87,369

)

�

147,063

�

�

10,036

�

�

17,490

�

�

--

�

�

87,220

�

�

Provision for (benefit from)
income taxes

(1,213

)

�

--

�

�

--

�

�

--

�

�

16,004

�

�

14,791

�

�

Net income (loss)

$

(86,156

)

�

$

147,063

�

�

$

10,036

�

�

$

17,490

�

�

$

(16,004

)

�

$

72,429

�

Net income (loss) per
share�(1)

$

(0.40

)

�

$

0.68

�

�

$

0.05

�

�

$

0.08

�

�

$

(0.10

)

�

$

0.31

�

�

(1)

�

GAAP net loss per share is
calculated based upon 215,932 basic and diluted weighted-average shares of
common stock. Non-GAAP net income per share is calculated based upon 237,404
diluted weighted-average shares of common�stock.

(2)

�

Other operating expenses
include amortization of acquisition-related intangible assets of $5.3 million
and total employer payroll tax-related items on employee stock transactions
of $4.7 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 interim reporting periods. For fiscal
2019, the projected non-GAAP tax rate was 17%.

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Six Months Ended July 31, 2019
(in thousands, except percentages and per share data)
(unaudited)

�

GAAP

�

Share-Based�
Compensation�
Expenses

�

Other�
Operating�
Expenses�(2)

�

Amortization�
of Debt�
Discount and�
Issuance�
Costs

�

Income Tax�
Effects�(3)

�

Non-GAAP

Costs and expenses:

�

�

�

�

�

�

�

�

�

�

�

Costs of subscription services

$

233,630

�

�

$

(22,416

)

�

$

(24,399

)

�

$

--

�

�

$

--

�

�

$

186,815

�

Costs of professional services

275,923

�

�

(35,141

)

�

(4,692

)

�

--

�

�

--

�

�

236,090

�

Product development

725,953

�

�

(196,995

)

�

(19,011

)

�

--

�

�

--

�

�

509,947

�

Sales and marketing

553,136

�

�

(81,544

)

�

(23,283

)

�

--

�

�

--

�

�

448,309

�

General and administrative

170,048

�

�

(58,360

)

�

(5,319

)

�

--

�

�

--

�

�

106,369

�

Operating income (loss)

(245,883

)

�

394,456

�

�

76,704

�

�

--

�

�

--

�

�

225,277

�

Operating margin

(14.4

)%

�

23.0

%

�

4.6

%

�

--

%

�

--

%

�

13.2

%

Other income (expense), net

7,035

�

�

--

�

�

--

�

�

25,888

�

�

--

�

�

32,923

�

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

(238,848

)

�

394,456

�

�

76,704

�

�

25,888

�

�

--

�

�

258,200

�

Provision for (benefit from)
income taxes

(1,861

)

�

--

�

�

--

�

�

--

�

�

45,755

�

�

43,894

�

Net income (loss)

$

(236,987

)

�

$

394,456

�

�

$

76,704

�

�

$

25,888

�

�

$

(45,755

)

�

$

214,306

�

Net income (loss) per
share�(1)

$

(1.05

)

�

$

1.75

�

�

$

0.34

�

�

$

0.12

�

�

$

(0.29

)

�

$

0.87

�

�

(1)

�

GAAP net loss per share is
calculated based upon 224,857 basic and diluted weighted-average shares of
common stock. Non-GAAP net income per share is calculated based upon 246,610
diluted weighted-average shares of common�stock.

(2)

�

Other operating expenses
include amortization of acquisition-related intangible assets of $38.9
million and total employer payroll tax-related items on employee stock
transactions of $37.8 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 interim reporting periods. For fiscal
2020, the projected non-GAAP tax rate is 17%.

�

�

Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Six Months Ended July 31, 2018
(in thousands, except percentages and per share data)
(unaudited)

�

GAAP

�

Share-Based�
Compensation�
Expenses

�

Other�
Operating�
Expenses�(2)

�

Amortization�
of Debt�
Discount and�
Issuance�
Costs

�

Income Tax�
Effects�(3)

�

Non-GAAP

Costs and expenses:

�

�

�

�

�

�

�

�

�

�

�

Costs of subscription services

$

167,768

�

�

$

(16,398

)

�

$

(8,239

)

�

$

--

�

�

$

--

�

�

$

143,131

�

Costs of professional services

210,433

�

�

(23,310

)

�

(2,220

)

�

--

�

�

--

�

�

184,903

�

Product development

556,424

�

�

(143,865

)

�

(12,757

)

�

--

�

�

--

�

�

399,802

�

Sales and marketing

395,235

�

�

(54,979

)

�

(3,619

)

�

--

�

�

--

�

�

336,637

�

General and administrative

120,749

�

�

(41,170

)

�

(2,598

)

�

--

�

�

--

�

�

76,981

�

Operating income (loss)

(160,246

)

�

279,722

�

�

29,433

�

�

--

�

�

--

�

�

148,909

�

Operating margin

(12.4

)%

�

21.7

%

�

2.2

%

�

--

%

�

--

%

�

11.5

%

Other income (expense), net

(2,235

)

�

--

�

�

--

�

�

35,629

�

�

--

�

�

33,394

�

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

(162,481

)

�

279,722

�

�

29,433

�

�

35,629

�

�

--

�

�

182,303

�

Provision for (benefit from)
income taxes

(1,915

)

�

--

�

�

--

�

�

--

�

�

32,870

�

�

30,955

�

Net income (loss)

$

(160,566

)

�

$

279,722

�

�

$

29,433

�

�

$

35,629

�

�

$

(32,870

)

�

$

151,348

�

Net income (loss) per
share�(1)

$

(0.75

)

�

$

1.30

�

�

$

0.14

�

�

$

0.17

�

�

$

(0.22

)

�

$

0.64

�

�

(1)

�

GAAP net loss per share is
calculated based upon 214,517 basic and diluted weighted-average shares of
common stock. Non-GAAP net income per share is calculated based upon 236,706
diluted weighted-average shares of common�stock.

(2)

�

Other operating expenses
include total employer payroll tax-related items on employee stock
transactions of $19.0 million and amortization of acquisition-related
intangible assets of $10.4 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 interim reporting periods. For fiscal
2019, the projected non-GAAP tax rate was 17%.

About Workday

Workday is a leading
provider of enterprise cloud applications for finance and human
resources. Founded
in 2005, Workday delivers financial management, human capital management,
planning, and analytics applications designed for the world's largest companies, educational institutions, and government
agencies. Organizations ranging from medium-sized businesses to Fortune 50 enterprises have selected
Workday.

�

� 2019.
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.


About Non-GAAP Financial Measures

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

�

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

�

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


  • Share-based
    compensation expenses.    �Although share-based compensation
    is an important aspect of the compensation of our employees and
    executives, management believes it is useful to exclude share-based
    compensation expenses to better understand the long-term performance of
    our core business and to facilitate comparison of our results to those of
    peer companies. Share-based compensation expenses are determined using a
    number of factors, including our stock price, volatility, and forfeiture
    rates that are beyond our control and generally unrelated to operational
    decisions and performance in any particular period. Further, share-based
    compensation expenses are not reflective of the value ultimately received
    by the grant recipients.
  • Other operating
    expenses    . Other operating expenses includes
    employer payroll tax-related items on employee stock transactions and
    amortization of acquisition-related intangible assets. The amount of
    employer payroll tax-related items on employee stock transactions is
    dependent on our stock price and other factors that are beyond our control
    and do not correlate to the operation of the business. For business
    combinations, we generally allocate a portion of the purchase price to
    intangible assets. The amount of the allocation is based on estimates and
    assumptions made by management and is subject to amortization. The amount
    of purchase price allocated to intangible assets and the term of its
    related amortization can vary significantly and are unique to each
    acquisition, and thus we do not believe it is reflective of ongoing
    operations.
  • Amortization of
    debt discount and issuance costs    . Under GAAP, we
    are required to separately account for liability (debt) and equity
    (conversion option) components of the convertible senior notes that were
    issued in private placements in June 2013 and September 2017. Accordingly,
    for GAAP purposes we are required to recognize the effective interest
    expense on our convertible senior notes and amortize the issuance costs
    over the term of the notes. The difference between the effective interest
    expense and the contractual interest expense and the amortization expense
    of issuance costs are excluded from management's assessment of our
    operating performance because management believes that these non-cash
    expenses are not indicative of ongoing operating performance. Management
    believes that the exclusion of the non-cash interest expense provides
    investors an enhanced view of Workday's operational performance.
  • 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 interim reporting periods. In
    projecting this long-term non-GAAP tax rate, we utilize a three-year
    financial projection that excludes the direct impact of share-based
    compensation and related employer payroll taxes, amortization of
    acquisition-related intangible assets, and amortization of debt discount
    and issuance costs. The projected rate considers other factors such as our
    current operating structure, existing tax positions in various
    jurisdictions, and key legislation in major jurisdictions where we
    operate. For fiscal 2020 and 2019, we�determined the projected
    non-GAAP tax rate to be 17%. We will periodically re-evaluate this tax
    rate, as necessary, for significant events, based on our ongoing analysis
    of the 2017 U.S. Tax Cuts and Jobs Act, relevant tax law changes, material
    changes in the forecasted geographic earnings mix, and any significant
    acquisitions.

    �

    The use of non-GAAP operating income
    (loss) and non-GAAP net income (loss) per share measures have certain
    limitations as they do not reflect all items of income and expense that affect
    Workday's operations. Workday compensates for these limitations by reconciling
    the non-GAAP financial measures to the most comparable GAAP financial measures.
    These non-GAAP financial measures should be considered in addition to, not as a
    substitute for or in isolation from, measures prepared in accordance with GAAP.
    Further, these non-GAAP measures may differ from the non-GAAP information used
    by other companies, including peer companies, and therefore comparability may
    be limited. Management encourages investors and others to review Workday's
    financial information in its entirety and not rely on a single financial
    measure.

    �

    Forward-Looking
    Statements

    This press
    release contains forward-looking statements including, among other things,
    statements regarding the expected performance and benefits of Workday's
    offerings. The words "believe," "may," "will," "estimate," "continue,"
    "anticipate," "intend," "expect," "seek," "plan," "project," 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, risks described
    in our filings with the Securities and Exchange Commission (SEC), including our
    Form 10-K for the fiscal year ended January 31, 2019 and our future reports
    that we may file with the SEC from time to time, which could cause actual
    results to vary from expectations. Workday assumes no obligation to, and does
    not currently intend to, update any such forward-looking statements after the
    date of this release.

    �

    Any
    unreleased services, features, or functions referenced in this document, our
    website, or other press releases or public statements that are not currently
    available are subject to change at Workday's discretion and may not be
    delivered as planned or at all. Customers who purchase Workday, Inc. services
    should make their purchase decisions based upon services, features, and
    functions that are currently available.

    �

    � 2019.
    Workday, Inc. All rights reserved. Workday and the Workday logo are registered
    trademarks of Workday, Inc.

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