GlobeNewswire Inc | Nov 19, 2020 04:01PM EST

November 19, 2020

Third Quarter Total Revenues of $1.11 Billion, Up 17.9% Year Over YearSubscription Revenue of $968.5 Million, Up 21.3% Year Over YearSubscription Revenue Backlogof $8.87 Billion, Up 23.4% Year Over Year

PLEASANTON, Calif., Nov. 19, 2020 (GLOBE NEWSWIRE) -- Workday, Inc.(NASDAQ:WDAY), a leader in enterprise cloud applications forfinanceandhuman resources, today announced results for the fiscal 2021 third quarter ended Oct.31, 2020.

Fiscal 2021 Third Quarter Results

-- Total revenues were $1.11 billion, an increase of 17.9% from the third quarter of fiscal 2020. Subscription revenue was $968.5 million, an increase of 21.3% from the same period last year. -- Operating loss was $14.1 million, or negative 1.3% of revenues, compared to an operating loss of $110.3 million, or negative 11.8% of revenues, in the same period last year. Non-GAAP operating income for the third quarter was $268.1 million, or 24.2% of revenues, compared to a non-GAAP operating income of $142.6 million, or 15.2% of revenues, in the same period last year.1 -- Net loss per basic and diluted share was $0.10, compared to a net loss per basic and diluted share of $0.51 in the third quarter of fiscal 2020. Non-GAAP net income per diluted share was $0.86, compared to a non-GAAP net income per diluted share of $0.53 in the same period last year.2 -- Operating cash flows were $293.8 million compared to $258.0 million in the prior year. -- Cash, cash equivalents, and marketable securities were $2.95 billion as of Oct.31, 2020.

Comments on the News

It was another strong quarter across our product portfolio with continued momentum in financial management which has now reached 1,000 customers. We also had someof our largest Workday Human Capital Management go-lives to-date and record customer demand on the strategic sourcing front, said Aneel Bhusri, co-founder and co-CEO, Workday. In this rapidly changing environment, the value of Workday in helping businesses drive and support change is clear, as more organizations focus on digital acceleration in order to meet the demands of the year and beyond. I continue to be so impressed and appreciative of our employees and customers who are stepping up in such encouraging ways to navigate these challengingtimes.

In addition to several strategic wins in HR and finance, we also saw continued momentum selling into our existing customer base, said Chano Fernandez, co-CEO, Workday. Whether our employees were helping to innovate, drive awareness, close deals, or successfully supporting deployments all in a fully virtual way their commitment to our customers this quarter is evident, and I couldnt be prouder. As we look ahead, I remain confident in our ability to capitalize on the growth opportunity in front of us while helping to take our customers to new heights.

We executed well in an uncertain environment and delivered strong results, with subscription revenue growth of 21.3% and non-GAAP operating margin of 24.2%, said Robynne Sisco, president and chief financial officer, Workday. Based on our strong third quarter, we are raising our fiscal 2021 subscription revenue guidance to a range of $3.773 billion to $3.775 billion. As we enter Q4, we are increasing our pace of investments to capitalize on the long-term opportunity that we see ahead.

Recent Highlights

-- Workday had more than 190 virtual customer go-lives consisting of organizations using Workday as the core system of record for finance and human resources in the third quarter. This includes Accenture, a leading global professional services company and Workday strategic partner, which is now live on Workday HCM, with more than 500,000 employees gaining greater visibility and simplified experiences as part of the organizations ongoing digital business and HR transformation efforts. -- Workday 2020 Release 2 included the availability of Workday Accounting Center and machine learning-driven predictive forecasts for Workday Adaptive Planning, helping to bring new levels of visibility and control to the office of the chief financial officer. In addition, Workday made Workday Talent Marketplace available, which delivers skills-based talent matching that connects people with relevant work and growth opportunities. -- To further support equity in the workplace and in communities, Workday shared its commitments to social justice, and introduced two new offerings, VIBE CentralTM and VIBE IndexTM, to help organizations advance belonging and diversity initiatives. -- Workday was positioned by Gartner, Inc. in the Leaders quadrant of the 2020 Gartner Magic Quadrant for Cloud Financial Planning & Analysis Solutions3 for the fourth year in a row. -- Workday hosted a virtual conference, Conversations for a Changing World, which featured global changemakers, visionary CEO speakers, and sessions highlighting how customers can navigate the changing world with Workday. -- Scout RFP, a Workday company, is now Workday Strategic Sourcing, reflecting Workdays commitment to elevate and help transform the office of procurement. -- Workday continues to support its employees through the COVID-19 pandemic with additional benefits, including modified schedules, caregiver flexibility, and financial aid through an employee relief fund. In addition, the majority of employees will not be required to return to their regular Workday office prior to Aug. 2, 2021.

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2021 third quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 1:30 p.m. PT/4:30 p.m. ET and can be accessed via webcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

Workday uses the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Non-GAAPoperating income excludes share-based compensation expenses, employer payrolltax-relateditems on employee stock transactions, and1 amortization expense for acquisition-related intangible assets.See the section titled ?About Non-GAAP Financial Measures? in the accompanying financial tables for further details. Non-GAAPnet income per share excludes share-based compensation expenses, employer payrolltax-relateditems on employee stock transactions,2 amortization expense for acquisition-related intangible assets,non-cashinterest expense related to our convertible senior notes, and income tax effects. See the section titled ?About Non-GAAP Financial Measures? in the accompanying financial tables for further details. Gartner ?Magic Quadrant for Cloud Financial Planning & Analysis Solutions,?3 by Greg Leiter, Robert Anderson, John Van Decker, 6 October 2020. Previously listed as Adaptive Insights since Workday announced its acquisition of the company in June 2018.

Required 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 Gartners 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.

About Workday

Workday is a leading provider of enterprise cloud applications for financeandhuman resources, helping customers adapt and thrive in a changing world. Workday applications for financial management, human resources, planning, spend management, and analytics have been adopted by thousands of organizations around the world and across industries from medium-sized businesses to more than 45 percent of the Fortune 500. For more information about Workday, visit workday.com.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to Workdays financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled About Non-GAAP Financial Measures. A reconciliation of our forward outlook for non-GAAP operating margin with our forward-looking GAAP operating margin is not available without unreasonable efforts as the quantification of share-based compensation expense, which is excluded from our non-GAAP operating margin, requires additional inputs such as the number of shares granted and market prices that are not ascertainable.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding Workdays fiscal 2021 subscription revenue, investments, and ability to capitalize on growth opportunities, including over the long term. The words believe, may, will, estimate, continue, anticipate, intend, expect, seek, plan, project, looking ahead, look to, move into, 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) the impact of the ongoing COVID-19 pandemic on our business, as well as our customers, prospects, partners, and service providers; (ii) our ability to implement our plans, objectives, and other expectations with respect to any of our acquired companies; (iii) breaches in our security measures, unauthorized access to our customers or other users personal data, or disruptions in our data center or computing infrastructure operations; (iv) service outages, delays in the deployment of our applications, and the failure of our applications to perform properly; (v) our ability to manage our growth effectively; (vi) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (vii) the development of the market for enterprise cloud applications and services; (viii) acceptance of our applications and services by customers and individuals, including any new features, enhancements, and modifications, as well as the acceptance of any underlying technology such as machine learning, artificial intelligence, and blockchain; (ix) adverse changes in general economic or market conditions; (x) the regulatory, economic, and political risks associated with our domestic and international operations; (xi) the regulatory risks related to new and evolving technologies such as machine learning, artificial intelligence, and blockchain; (xii) delays or reductions in information technology spending; and (xiii) changes in sales, which may not be immediately reflected in our results due to our subscription model. Further information on these and additional risks that could affect Workdays results is included in our filings with the Securities and Exchange Commission (SEC), including our Form 10-Q for the fiscal quarter ended July 31, 2020, 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 Workdays 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.

2020 Workday, Inc. All rights reserved. Workday, VIBE Central, VIBE Index, Adaptive Insights, Scout, and the Workday Logo are trademarks or registered trademarks of Workday, Inc. registered in the United States and elsewhere. All other brand and product names are trademarks or registered trademarks of their respective holders.

Workday, Inc.Condensed Consolidated Balance Sheets(in thousands)(unaudited) October 31, January 31, 2020 2020Assets Current assets: Cash and cash equivalents $ 1,067,038 $ 731,141 Marketable securities 1,880,772 1,213,432 Trade and other receivables, net 742,744 877,578 Deferred costs 110,024 100,459 Prepaid expenses and other current assets 157,664 172,012 Total current assets 3,958,242 3,094,622 Property and equipment, net 976,610 936,179 Operating lease right-of-use assets 415,547 290,902 Deferred costs, noncurrent 232,413 222,395 Acquisition-related intangible assets, net 262,603 308,401 Goodwill 1,819,625 1,819,261 Other assets 179,987 144,605 Total assets $ 7,845,027 $ 6,816,365 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 54,949 $ 57,556 Accrued expenses and other current 129,794 130,050 liabilitiesAccrued compensation 264,443 248,154 Unearned revenue 2,000,417 2,223,178 Operating lease liabilities 84,552 66,147 Debt, current 1,091,050 244,319 Total current liabilities 3,625,205 2,969,404 Debt, noncurrent 701,178 1,017,967 Unearned revenue, noncurrent 68,874 86,025 Operating lease liabilities, noncurrent 352,900 241,425 Other liabilities 18,816 14,993 Total liabilities 4,766,973 4,329,814 Stockholders? equity: Common stock 240 231 Additional paid-in capital 6,184,070 5,090,187 Treasury stock (269,083 ) ? Accumulated other comprehensive income 1,110 23,492 (loss)Accumulated deficit (2,838,283 ) (2,627,359 )Total stockholders? equity 3,078,054 2,486,551 Total liabilities and stockholders? equity $ 7,845,027 $ 6,816,365

Workday, Inc.Condensed Consolidated Statements of Operations(in thousands, except per share data)(unaudited) Three Months Ended October Nine Months Ended October 31, 31, 2020 2019 2020 2019Revenues: Subscription $ 968,547 $ 798,516 $ 2,782,201 $ 2,256,695 servicesProfessional 137,413 139,584 404,111 394,212 servicesTotal revenues 1,105,960 938,100 3,186,312 2,650,907 Costs and expenses^ (1):Costs ofsubscription 152,396 122,305 442,666 355,935 servicesCosts ofprofessional 142,785 148,625 442,422 424,548 servicesProduct 419,962 401,742 1,282,127 1,127,695 developmentSales and 302,870 286,794 897,924 839,930 marketingGeneral and 102,024 88,884 296,461 258,932 administrativeTotal costs and 1,120,037 1,048,350 3,361,600 3,007,040 expensesOperating income (14,077 ) (110,250 ) (175,288 ) (356,133 )(loss)Other income (8,846 ) (4,136 ) (31,272 ) 2,899 (expense), netLoss beforeprovision for (22,923 ) (114,386 ) (206,560 ) (353,234 )(benefit from)income taxesProvision for(benefit from) 1,417 1,343 4,164 (518 )income taxesNet loss $ (24,340 ) $ (115,729 ) $ (210,724 ) $ (352,716 )Net loss pershare, basic and $ (0.10 ) $ (0.51 ) $ (0.89 ) $ (1.56 )dilutedWeighted-averageshares used tocompute net loss 238,059 228,461 235,685 226,071 per share, basicand diluted

(1) Costs and expenses include share-based compensation expenses as follows:Costs of subscription $ 16,767 $ 13,634 $ 45,484 $ 36,050 servicesCosts of professional 27,349 22,249 74,467 57,390 servicesProduct development 128,423 118,215 378,950 315,210 Sales and marketing 54,077 47,142 150,881 128,686 General and 33,216 29,762 97,958 88,122 administrative

Workday, Inc.Condensed Consolidated Statements of Cash Flows(in thousands)(unaudited) Three Months Ended October Nine Months Ended October 31, 31, 2020 2019 2020 2019Cash flows fromoperating activities:Net loss $ (24,340 ) $ (115,729 ) $ (210,724 ) $ (352,716 )Adjustments toreconcile net lossto net cash provided by (usedin) operatingactivities:Depreciation and 73,864 72,233 218,556 201,152 amortizationShare-basedcompensation 259,832 231,002 747,740 625,149 expensesAmortization of 28,732 23,015 82,141 65,897 deferred costsAmortization ofdebt discount and 12,098 13,512 41,466 39,400 issuance costsNon-cash lease 22,141 17,081 60,389 49,155 expenseOther (8,760 ) 2,744 8,040 (8,953 )Changes inoperating assetsand liabilities, net of businesscombinations:Trade and other (53,923 ) 2,197 127,663 86,139 receivables, netDeferred costs (41,823 ) (34,415 ) (101,724 ) (81,107 )Prepaid expenses 25,898 7,463 36,738 677 and other assetsAccounts payable 3,762 1,938 (9,313 ) 4,488 Accrued expensesand other (5,037 ) 41,716 (46,378 ) 6,595 liabilitiesUnearned revenue 1,358 (4,755 ) (239,899 ) (68,392 )Net cash providedby (used in) 293,802 258,002 714,695 567,484 operatingactivitiesCash flows frominvesting activities:Purchases ofmarketable (806,713 ) (375,144 ) (1,963,244 ) (1,429,046 )securitiesMaturities ofmarketable 427,910 494,023 1,282,324 1,339,830 securitiesSales of marketable ? ? 5,279 55,499 securitiesOwned real estate (1,072 ) (21,832 ) (5,323 ) (95,615 )projectsCapitalexpenditures,excluding owned (78,197 ) (55,163 ) (204,692 ) (196,274 )real estateprojectsBusinesscombinations, net ? ? ? (12,885 )of cash acquiredPurchases ofnon-marketable (4,618 ) (9,577 ) (63,218 ) (17,293 )equity and otherinvestmentsSales andmaturities ofnon-marketable 24 252 6,223 252 equity and otherinvestmentsOther ? ? ? (9 )Net cash providedby (used in) (462,666 ) 32,559 (942,651 ) (355,541 )investingactivitiesCash flows fromfinancing activities:Proceeds fromborrowings on term ? ? 747,795 ? loan, netPayments onconvertible senior ? (3 ) (249,946 ) (30 )notesPayments on term (9,375 ) ? (9,375 ) ? loanProceeds fromissuance of common 3,650 1,780 78,167 63,320 stock from employeeequity plansOther (181 ) (175 ) (2,436 ) (375 )Net cash providedby (used in) (5,906 ) 1,602 564,205 62,915 financingactivitiesEffect of exchange 40 48 546 (204 )rate changesNet increase(decrease) in cash, (174,730 ) 292,211 336,795 274,654 cash equivalents,and restricted cashCash, cashequivalents, andrestricted cash at 1,246,246 624,646 734,721 642,203 the beginning ofperiodCash, cashequivalents, and $ 1,071,516 $ 916,857 $ 1,071,516 $ 916,857 restricted cash atthe end of period

Workday, Inc.Reconciliation of GAAP to Non-GAAP DataThree Months Ended October 31, 2020(in thousands, except percentages and per share data)(unaudited) Amortization of Income Tax Share-Based Other Convertible and GAAP Compensation Operating Senior Notes Dilution Non-GAAP Expenses Expenses^ Debt Effects ^ (2) Discount and (3) Issuance CostsCosts and expenses:Costs ofsubscription $ 152,396 $ (16,767 ) $ (7,811 ) $ ? $ ? $ 127,818 servicesCosts ofprofessional 142,785 (27,349 ) (824 ) ? ? 114,612 servicesProduct 419,962 (128,423 ) (4,006 ) ? ? 287,533 developmentSales and 302,870 (54,077 ) (8,352 ) ? ? 240,441 marketingGeneral and 102,024 (33,216 ) (1,355 ) ? ? 67,453 administrativeOperating (14,077 ) 259,832 22,348 ? ? 268,103 income (loss)Operating (1.3 ) 23.5 % 2.0 % ? % ? % 24.2 %margin %Other income (8,846 ) ? ? 11,988 ? 3,142 (expense), netIncome (loss)beforeprovision for (22,923 ) 259,832 22,348 11,988 ? 271,245 (benefit from)income taxesProvision for(benefit from) 1,417 ? ? ? 50,119 51,536 income taxesNet income $ (24,340 ) $ 259,832 $ 22,348 $ 11,988 $ (50,119 ) $ 219,709 (loss)Net income(loss) per $ (0.10 ) $ 1.09 $ 0.09 $ 0.05 $ (0.27 ) $ 0.86 share^ (1)

GAAP net loss per share is calculated based upon 238,059 basic and(1) diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 254,176 diluted weighted-average shares of common stock. Other operating expenses include amortization of acquisition-related(2) intangible assets of $14.2 million and total employer payroll tax-related items on employee stock transactions of $8.1 million. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across(3) the reporting periods. For fiscal 2021, we determined the projected non-GAAP tax rate to be 19%. Included in this is a dilution impact of $0.06 from the conversion of basic net income (loss) per share to diluted net income (loss) per share.

Workday, Inc.Reconciliation of GAAP to Non-GAAP DataThree Months Ended October 31, 2019(in thousands, except percentages and per share data)(unaudited) Amortization of Income Tax Share-Based Other Convertible and GAAP Compensation Operating Senior Notes Dilution Non-GAAP Expenses Expenses^ Debt Effects^ (2) Discount and (3) Issuance CostsCosts and expenses:Costs ofsubscription $ 122,305 $ (13,634 ) $ (7,593 ) $ ? $ ? $ 101,078 servicesCosts ofprofessional 148,625 (22,249 ) (569 ) ? ? 125,807 servicesProduct 401,742 (118,215 ) (4,420 ) ? ? 279,107 developmentSales and 286,794 (47,142 ) (7,820 ) ? ? 231,832 marketingGeneral and 88,884 (29,762 ) (1,453 ) ? ? 57,669 administrativeOperating (110,250 ) 231,002 21,855 ? ? 142,607 income (loss)Operating (11.8 ) 24.6 % 2.4 % ? % ? % 15.2 %margin %Other income (4,136 ) ? ? 13,511 ? 9,375 (expense), netIncome (loss)beforeprovision for (114,386 ) 231,002 21,855 13,511 ? 151,982 (benefit from)income taxesProvision for(benefit from) 1,343 ? ? ? 24,494 25,837 income taxesNet income $ (115,729 ) $ 231,002 $ 21,855 $ 13,511 $ (24,494 ) $ 126,145 (loss)Net income(loss) per $ (0.51 ) $ 1.01 $ 0.10 $ 0.06 $ (0.13 ) $ 0.53 share^ (1)

GAAP net loss per share is calculated based upon 228,461 basic and(1) diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 240,041 diluted weighted-average shares of common stock. Other operating expenses include amortization of acquisition-related(2) intangible assets of $15.9 million and total employer payroll tax-related items on employee stock transactions of $5.9 million. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across(3) the reporting periods. For fiscal 2020, the projected non-GAAP tax rate was 17%. Included in the per share amount is a dilution impact of $0.02 from the conversion of basic net income (loss) per share to diluted net income (loss) per share.

Workday, Inc.Reconciliation of GAAP to Non-GAAP DataNine Months Ended October 31, 2020(in thousands, except percentages and per share data)(unaudited) Amortization of Share-Based Other Convertible Income Tax GAAP Compensation Operating Senior Notes and Dilution Non-GAAP Expenses Expenses^ Debt Effects ^(3) (2) Discount and Issuance CostsCosts and expenses:Costs ofsubscription $ 442,666 $ (45,484 ) $ (26,298 ) $ ? $ ? $ 370,884 servicesCosts ofprofessional 442,422 (74,467 ) (4,843 ) ? ? 363,112 servicesProduct 1,282,127 (378,950 ) (20,710 ) ? ? 882,467 developmentSales and 897,924 (150,881 ) (26,841 ) ? ? 720,202 marketingGeneral and 296,461 (97,958 ) (5,111 ) ? ? 193,392 administrativeOperating (175,288 ) 747,740 83,803 ? ? 656,255 income (loss)Operating (5.5 ) 23.5 % 2.6 % ? % ? % 20.6 %margin %Other income (31,272 ) ? ? 41,209 ? 9,937 (expense), netIncome (loss)beforeprovision for (206,560 ) 747,740 83,803 41,209 ? 666,192 (benefit from)income taxesProvision for(benefit from) 4,164 ? ? ? 122,412 126,576 income taxesNet income $ (210,724 ) $ 747,740 $ 83,803 $ 41,209 $ (122,412 ) $ 539,616 (loss)Net income(loss) per $ (0.89 ) $ 3.17 $ 0.36 $ 0.17 $ (0.66 ) $ 2.15 share^ (1)

GAAP net loss per share is calculated based upon 235,685 basic and(1) diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 251,517 diluted weighted-average shares of common stock. Other operating expenses include amortization of acquisition-related(2) intangible assets of $45.8 million and total employer payroll tax-related items on employee stock transactions of $38.0 million. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across(3) the reporting periods. For fiscal 2021, we have determined the projected non-GAAP tax rate to be 19%. Included in the per share amount is a dilution impact of $0.14 from the conversion of basic net income (loss) per share to diluted net income (loss) per share.

Workday, Inc.Reconciliation of GAAP to Non-GAAP DataNine Months Ended October 31, 2019(in thousands, except percentages and per share data)(unaudited) Amortization of Income Tax Share-Based Other Convertible and GAAP Compensation Operating Senior Notes Dilution Non-GAAP Expenses Expenses^ Debt Effects ^ (2) Discount and (3) Issuance CostsCosts and expenses:Costs ofsubscription $ 355,935 $ (36,050 ) $ (31,992 ) $ ? $ ? $ 287,893 servicesCosts ofprofessional 424,548 (57,390 ) (5,261 ) ? ? 361,897 servicesProduct 1,127,695 (315,210 ) (23,431 ) ? ? 789,054 developmentSales and 839,930 (128,686 ) (31,103 ) ? ? 680,141 marketingGeneral and 258,932 (88,122 ) (6,772 ) ? ? 164,038 administrativeOperating (356,133 ) 625,458 98,559 ? ? 367,884 income (loss)Operating (13.4 ) 23.6 % 3.7 % ? % ? % 13.9 %margin %Other income 2,899 ? ? 39,399 ? 42,298 (expense), netIncome (loss)beforeprovision for (353,234 ) 625,458 98,559 39,399 ? 410,182 (benefit from)income taxesProvision for(benefit from) (518 ) ? ? ? 70,249 69,731 income taxesNet income $ (352,716 ) $ 625,458 $ 98,559 $ 39,399 $ (70,249 ) $ 340,451 (loss)Net income(loss) per $ (1.56 ) $ 2.77 $ 0.44 $ 0.17 $ (0.41 ) $ 1.41 share^ (1)

GAAP net loss per share is calculated based upon 226,071 basic and(1) diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based upon 240,657 diluted weighted-average shares of common stock. Other operating expenses include amortization of acquisition-related(2) intangible assets of $54.8 million and total employer payroll tax-related items on employee stock transactions of $43.7 million. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across(3) the reporting periods. For fiscal 2020, the projected non-GAAP tax rate was 17%. Included in the per share amount is a dilution impact of $0.10 from the conversion of basic net income (loss) per share to diluted net income (loss) per share.

About Non-GAAP Financial Measures

To provide investors and others with additional information regarding Workdays 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-GAAPoperating income (loss) differs from GAAP in that it excludes share-based compensation expenses, employer payrolltax-relateditems on employee stock transactions, and amortization expense for acquisition-related intangible assets.Non-GAAPnet income (loss) per share differs from GAAP in that it excludes share-based compensation expenses, employer payrolltax-relateditems on employee stock transactions, amortization expense for acquisition-related intangible assets,non-cashinterest expense related to our convertible senior notes, and income tax effects.

Workdays 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 Workdays financial performance. Management believes these non-GAAP financial measures reflect Workdays ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in Workdays business. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Workdays 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 Workdays 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 convertible senior notes 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 managements 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 Workdays operational performance. -- Income tax effects.We utilize a fixed long-term projected tax rate in our computation of thenon-GAAPincome tax provision to provide better consistency across the reporting periods. In projecting this long-termnon-GAAPtax 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, we determined the projected non-GAAP tax rate to be 17%. For fiscal 2021, 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 periodicallyre-evaluatethis 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 Workdays 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 Workdays financial information in its entirety and not rely on a single financial measure.

Investor Relations Contact:Justin FurbyIR@Workday.com

Media Contact:Nina OestlienMedia@Workday.com