Workday Announces Fiscal 2013 Third Quarter Financial Results

Wed Nov 28, 2012 4:05pm EST

* Reuters is not responsible for the content in this press release.

  PLEASANTON, CA, Nov 28 (Marketwire) -- 
Workday, Inc. (NYSE: WDAY), a leader in enterprise cloud applications for
human resources and finance, today announced financial results for the
third quarter of fiscal 2013:


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


    

Cash, cash equivalents and marketable securities were $797.4 million
as of October 31, 2012 and include net proceeds from our October initial
public offering of $684.6 million. Unearned revenue was $252.2 million, a
64% increase from last year.

    "Workday had a strong third quarter, and we continue to make great
strides as we build for the long term," said Aneel Bhusri, chairman,
co-founder, and co-CEO, Workday. "Our pace of innovation, high levels of
customer satisfaction, and employee-centric culture are key contributors
to our growth. With these differentiators, we see more companies choosing
Workday to bring HR, finance, and analytics to the cloud."

    "Workday is well positioned for growth as a leader in cloud-based human
capital management and financial management applications," said Mark
Peek, chief financial officer, Workday. "Fiscal 2013 fourth quarter
revenues are expected to be in the range of $75 and $79 million, or
growth of 74-83% as compared to the prior year. Fourth quarter
subscription revenues are anticipated to be within a range of $56 and $58
million."

    Recent Highlights 


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


    

Workday plans to host a conference call today to review its fiscal
2013 third quarter financial results and to discuss its financial
outlook. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and
can be accessed via webcast or through the company's Investor Relations
website at www.workday.com/investorrelations. The webcast will be
available live, and a replay will be available following completion of
the live broadcast for approximately 45 days. 

    (1) Non-GAAP operating results, net loss, and net loss per share for the
fiscal third quarters of 2012 and 2013 exclude share-based compensation,
and for the fiscal 2013 third quarter, also exclude a one-time charge
related to our contribution of 500,000 shares to the Workday Foundation.
See the section titled "About Non-GAAP Financial Measures" in the
accompanying financial tables for further details. 
 (2) Free cash flows
are defined as operating cash flows minus capital expenditures and
property and equipment acquired under capital lease. See the section
titled "About Non-GAAP Financial Measures" in the accompanying financial
tables for further details.

    About Workday
 Workday is a leading provider of enterprise cloud
applications for human resources and finance. Founded in 2005, Workday
delivers Human Capital Management, Financial Management, and analytics
applications designed for the world's largest organizations. Hundreds of
companies, ranging from medium-sized businesses to Fortune 50
enterprises, have selected Workday.

    Use of Non-GAAP Financial Measures 
 Reconciliations of non-GAAP
financial measures to Workday's financial results as determined in
accordance with GAAP are included at the end of this press release
following the accompanying financial data. For a description of these
non-GAAP financial measures, including the reasons management uses each
measure, please see the section of the tables titled "About Non-GAAP
Financial Measures." 

    Forward-Looking Statements 
 This press release contains forward-looking
statements including, among other things, statements regarding Workday's
fourth quarter revenue and subscription revenue projections, and our
expectations for future applications. The words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to risks, uncertainties, and
assumptions. If the risks materialize or assumptions prove incorrect,
actual results could differ materially from the results implied by these
forward-looking statements. Risks include, but are not limited to: (i)
adverse changes in general economic or market conditions; (ii) delays or
reductions in information technology spending; (iii) competitive factors,
including but not limited to pricing pressures, industry consolidation,
entry of new competitors and new applications and marketing initiatives
by our competitors; (iv) our ability to manage our growth effectively;
(v) our limited operating history, which makes it difficult to predict
future results; (vi) the development of the market for enterprise cloud
services; (vii) acceptance of our applications and services by customers;
(viii) breaches in our security measures or unauthorized access to our
customers' data; and (ix) changes in sales may not be immediately
reflected in our results due to our subscription model. Further
information on risks that could affect Workday's results is included in
our filings with the Securities and Exchange Commission, including our
registration statement on Form S-1 and our future reports on Form 10-K
and Form 10-Q and current reports on Form 8-K that we may file from time
to time, which could cause actual results to vary from expectations.
Workday assumes no obligation to, and does not currently intend to,
update any such forward-looking statements after the date of this release.

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

    Copyright 2012. Workday, Inc. All rights reserved. Workday and the
Workday logo are registered trademarks of Workday, Inc. All other brand
and product names are trademarks or registered trademarks of their
respective holders. 

                               Workday, Inc.
                   Condensed Consolidated Balance Sheets
              (in thousands, except share and per share data)

                                                  October 31,   January 31, 
                                                     2012          2012
                                                 ------------  ------------ 
                                                  (unaudited)
Assets
Current assets:
  Cash and cash equivalents                      $    442,980  $     57,529 
  Marketable securities                               354,397        53,634 
  Accounts receivable, net of allowance for
   doubtful accounts of $778 at October 31, 2012
   and $261 at January 31, 2012                        61,099        54,467 
  Deferred costs                                        8,636         9,450 
  Prepaid expenses and other current assets            14,542         8,092 
                                                 ------------  ------------ 
Total current assets                                  881,654       183,172 

Property and equipment, net                            39,760        25,861 
Deferred costs, noncurrent                             17,060        13,156 
Goodwill and intangible assets, net                     8,509         8,578 
Other assets                                            3,165         1,871 
                                                 ------------  ------------ 
Total assets                                     $    950,148  $    232,638 
                                                 ============  ============ 

Liabilities, redeemable convertible preferred
 stock and stockholders' equity (deficit)
Current liabilities:
  Accounts payable                               $      3,481  $      2,730 
  Accrued expenses and other current liabilities       14,925         6,808 
  Accrued compensation                                 22,487        13,891 
  Capital leases                                        6,946         3,561 
  Capital leases with related party                     2,634         3,514 
  Unearned revenue                                    164,421       114,734 
                                                 ------------  ------------ 
Total current liabilities                             214,894       145,238 
Capital leases, noncurrent                             17,144         6,594 
Capital lease with related party, noncurrent              289         2,047 
Unearned revenue, noncurrent                           87,742        73,363 
Other liabilities                                      14,578        10,051 
                                                 ------------  ------------ 
Total liabilities                                     334,647       237,293 
Commitments and contingencies
Redeemable convertible preferred stock, $0.001
 par value; no shares and 31 million shares
 authorized as of October 31, 2012 and January
 31, 2012; no shares and 30 million shares
 issued and outstanding as of October 31, 2012
 and January 31, 2012 with liquidation
 preference of $174,340 as of January 31, 2012              -       170,906 
Stockholder's equity (deficit):
  Convertible preferred stock, $0.001 par value;
   no shares and 68 million shares authorized as
   of October 31, 2012 and January 31, 2012; no
   shares and 68 million shares issued and
   outstanding as of October 31, 2012 and
   January 31, 2012 with liquidation preference
   of $93,716 as of January 31, 2012                        -            68 
  Preferred Stock, $0.001 par value; 10 million
   shares authorized and no shares issued and
   outstanding as of October 31, 2012                       -             - 
  Class A common stock, $0.001 par value; 750
   million shares authorized as of October 31,
   2012 and 26 million shares issued and
   outstanding as of October 31, 2012                      26             - 
  Class B common stock $0.001 par value; 240
   million shares authorized as of October 31,
   2012 and 140 million shares issued and
   outstanding as of October 31, 2012 (including
   4 million shares, subject to repurchase,
   legally issued and outstanding as of October
   31, 2012)                                              134             - 
  Common stock, $0.001 par value; no shares and
   200 million shares authorized as of October
   31, 2012 and January 31, 2012; no shares and
   36 million shares issued and outstanding as
   of October 31, 2012 and January 31, 2012
   (including 3 million shares, subject to
   repurchase, legally issued and outstanding as
   of January 31, 2012)                                     -            33 
  Additional paid-in capital                          986,245       106,457 
  Accumulated other comprehensive income                   32             3 
  Accumulated deficit                                (370,936)     (282,122)
                                                 ------------  ------------ 
Total stockholders' equity (deficit)                  615,501      (175,561)
                                                 ------------  ------------ 
Total liabilities, redeemable preferred stock
 and stockholders' equity (deficit)              $    950,148  $    232,638 
                                                 ============  ============ 

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

                                  Three Months Ended     Nine Months Ended
                                      October 31,           October 31,
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  --------- 
Revenues                         $  72,618  $  36,450  $ 192,138  $  91,269 
Costs and expenses(1):
Costs of revenues                   30,194     17,679     83,549     45,038 
Research and development            28,075     16,404     72,413     43,727 
Sales and marketing                 32,584     18,215     87,051     47,774 
General and administrative          22,633      3,594     36,310     10,083 
                                 ---------  ---------  ---------  --------- 
    Total costs and expenses       113,486     55,892    279,323    146,622 
Operating loss                     (40,868)   (19,442)   (87,185)   (55,353)
Other expense, net                    (364)      (243)    (1,036)      (574)
                                 ---------  ---------  ---------  --------- 
Loss before provision for income
 taxes                             (41,232)   (19,685)   (88,221)   (55,927)
Provision for income taxes              78         46         25        116 
                                 ---------  ---------  ---------  --------- 
Net loss                           (41,310)   (19,731)   (88,246)   (56,043)
                                 ---------  ---------  ---------  --------- 
Accretion of redeemable
 convertible preferred stock          (161)       (72)      (568)       (85)
                                 ---------  ---------  ---------  --------- 
Net loss attributable to common
 stockholders                    $ (41,471) $ (19,803) $ (88,814) $ (56,128)
                                 =========  =========  =========  ========= 

  Net loss per share
   attributable to Class A and
   Class B common stockholders,
   basic and diluted             $   (0.67) $   (0.66) $   (2.06) $   (1.93)
                                 =========  =========  =========  ========= 
  Weighted-average shares used
   to compute net loss per share
   attributable to Class A and
   Class B common stockholders      61,960     29,779     43,053     29,013 
                                 =========  =========  =========  ========= 

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

  Costs of revenues              $     609  $     182  $   1,101  $     416 
  Research and development           1,300        306      2,227        751 
  Sales and marketing                  970        233      1,838        533 
  General and administrative         3,273        389      4,714      1,056 

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

                                  Three Months Ended     Nine Months Ended
                                      October 31,           October 31,
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  --------- 
Cash flows from operating
 activities
Net loss                         $ (41,310) $ (19,731) $ (88,246) $ (56,043)
Adjustments to reconcile net
 loss to net cash provided by
 (used in) operating activities:
Depreciation and amortization        4,461      2,522     11,938      6,250 
Share-based compensation             6,152      1,110      9,880      2,755 
Amortization of deferred costs       2,750      1,824      8,336      5,095 
Donation of common stock to
 Workday Foundation                 11,250          -     11,250          - 
Other                                   11         15         41         45 
Changes in operating assets and
 liabilities:
  Accounts receivable                7,382        477     (6,632)   (17,251)
  Deferred costs                    (4,673)    (3,029)   (11,426)    (7,142)
  Prepaid expenses and other
   assets                           (3,395)    (2,149)    (7,744)    (4,151)
  Accounts payable                    (253)      (421)        73        391 
  Accrued and other liabilities      3,575      3,279     13,738      7,437 
  Unearned revenue                   4,692     10,592     64,066     55,482 
                                 ---------  ---------  ---------  --------- 
Net cash provided by (used in)
 operating activities               (9,358)    (5,511)     5,274     (7,132)

Cash flows from investing
 activities
Purchases of marketable
 securities                       (288,659)    (2,497)  (374,599)   (11,924)
Maturities of marketable
 securities                         19,845      5,005     72,785      8,606 
Purchase of cost method
 investment                              -          -          -     (1,000)
Purchases of property and
 equipment                            (801)    (2,663)    (6,803)    (3,742)
                                 ---------  ---------  ---------  --------- 
Net cash used in investing
 activities                       (269,615)      (155)  (308,617)    (8,060)

Cash flows from financing
 activities
Proceeds of initial public
 offering, net of issuance costs   684,620          -    684,620          - 
Proceeds from exercise of stock
 options                             2,955      1,028     10,085      4,198 
Proceeds from issuance of
 redeemable convertible
 preferred stock, net of
 issuance costs                          -     81,473          -     81,473 
Principal payments on capital
 lease obligations                  (1,483)      (366)    (3,274)      (366)
Principal payments on capital
 lease obligations with related
 party                                (886)      (831)    (2,638)    (2,582)
                                 ---------  ---------  ---------  --------- 
Net cash provided by financing
 activities                        685,206     81,304    688,793     82,723 
Effect of exchange rate changes          6          2          1          8 
                                 ---------  ---------  ---------  --------- 
Net increase in cash and cash
 equivalents                       406,239     75,640    385,451     67,539 
Cash and cash equivalents at the
 beginning of period                36,741     22,411     57,529     30,512 
                                 ---------  ---------  ---------  --------- 
Cash and cash equivalents at the
 end of period                   $ 442,980  $  98,051  $ 442,980  $  98,051 
                                 =========  =========  =========  ========= 

                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                For the Three Months Ended October 31, 2012
                   (in thousands, except per share data)
                                (unaudited)

                                                       Equity
                                                      Grant to    Non-GAAP
                                        Share-Based    Workday       as
                              GAAP     Compensation  Foundation   adjusted
                           ---------   ------------  ----------  ---------
Costs and expenses:
Costs of revenues          $  30,194   $       (609) $        -  $  29,585
Research and development      28,075         (1,300)          -     26,775
Sales and marketing           32,584           (970)          -     31,614
General and administrative    22,633         (3,273)    (11,250)     8,110

Operating loss               (40,868)         6,152      11,250    (23,466) 
Operating margin               (56.2%)          8.4%       15.5%     (32.3%)

Loss before provision for
 income taxes                (41,232)         6,152      11,250    (23,830) 

Provision for income taxes        78              -           -         78

Net loss                   $ (41,310)  $      6,152  $   11,250  $ (23,908) 

Net loss per share
 attributable to common
 stockholders, for Class A
 and Class B, basic and
 diluted (1)               $   (0.67)  $       0.10  $     0.18  $   (0.39) 


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

                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                For the Three Months Ended October 31, 2011
                   (in thousands, except per share data)
                                (unaudited)

                                                                  Non-GAAP
                                                    Share-Based      as
                                          GAAP     Compensation   adjusted
                                       ---------   ------------  ---------
Costs and expenses:
Costs of revenues                      $  17,679   $       (182) $  17,497
Research and development                  16,404           (306)    16,098
Sales and marketing                       18,215           (233)    17,982
General and administrative                 3,594           (389)     3,205

Operating loss                           (19,442)         1,110    (18,332) 
Operating margin                           (53.3%)          3.0%     (50.3%)

Loss before provision for income taxes   (19,685)         1,110    (18,575) 

Provision for income taxes                    46              -         46

Net loss                               $ (19,731)  $      1,110  $ (18,621) 

Net loss per share attributable to
 common stockholders, for Class A and
 Class B, basic and diluted (1)        $   (0.66)  $       0.03  $   (0.63) 


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

                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                For the Nine Months Ended October 31, 2012
                   (in thousands, except per share data)
                                (unaudited)

                                                       Equity
                                                      Grant to    Non-GAAP
                                        Share-Based    Workday       as
                              GAAP     Compensation  Foundation   adjusted
                           ---------   ------------  ----------  ---------
Costs and expenses:
Costs of revenues          $  83,549   $     (1,101) $        -  $  82,448
Research and development      72,413         (2,227)          -     70,186
Sales and marketing           87,051         (1,838)          -     85,213
General and administrative    36,310         (4,714)    (11,250)    20,346

Operating loss               (87,185)         9,880      11,250    (66,055) 
Operating margin               (45.4%)          5.1%        5.9%     (34.4%)

Loss before provision for
 income taxes                (88,221)         9,880      11,250    (67,091) 

Provision for income taxes        25              -           -         25

Net loss                   $ (88,246)  $      9,880  $   11,250  $ (67,116) 

Net loss per share
 attributable to common
 stockholders, for Class A
 and Class B, basic and
 diluted (1)               $   (2.06)  $       0.23  $     0.26  $   (1.57) 

(1) - Calculated based upon 43,053 basic and diluted weighted-average
 shares for Class A and Class B common stock

                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                For the Nine Months Ended October 31, 2011
                   (in thousands, except per share data)
                                (unaudited)

                                                                 Non-GAAP
                                                   Share-Based      as
                                        GAAP      Compensation   adjusted
                                     ----------   ------------  ----------
Costs and expenses:
Costs of revenues                    $   45,038   $       (416) $   44,622
Research and development                 43,727           (751)     42,976
Sales and marketing                      47,774           (533)     47,241
General and administrative               10,083         (1,056)      9,027

Operating loss                          (55,353)         2,756     (52,597) 
Operating margin                          (60.6%)          3.0%      (57.6%)

Loss before provision for income
 taxes                                  (55,927)         2,756     (53,171) 

Provision for income taxes                  116              -         116

Net loss                             $  (56,043)  $      2,756  $  (53,287) 

Net loss per share attributable to
 common stockholders, for Class A
 and Class B, basic and diluted (1)  $    (1.93)  $       0.09  $    (1.84) 

(1) - Calculated based upon 29,013 basic and diluted weighted-average
 shares for Class A and Class B common stock

                               Workday, Inc.
                              Revenue by Type
                               (in thousands)
                                (unaudited)

                                  Three Months Ended     Nine Months Ended
                                      October 31,           October 31,
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  --------- 
Revenues:
Subscription services            $  51,576  $  23,868  $ 130,698  $  59,603 
Professional services               21,042     12,582     61,440     31,666 
                                 ---------  ---------  ---------  --------- 
  Total revenues                 $  72,618  $  36,450  $ 192,138  $  91,269 
                                 =========  =========  =========  ========= 

Revenues:
Subscription services                 71.0%      65.5%      68.0%      65.3%
Professional services                 29.0%      34.5%      32.0%      34.7%
                                 ---------  ---------  ---------  --------- 
  Total revenues                     100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  ========= 

                               Workday, Inc.
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
                       (A Non-GAAP Financial Measure)
                               (in thousands)
                                (unaudited)

                                                             Three Months
                                                                Ended
                                                           October 31, 2012 
                                                          ----------------- 
GAAP cash flows from operating activities                 $          (9,358)
Capital expenditures                                                   (801)
Property and equipment acquired under capital lease                 (13,663)
                                                          ----------------- 
  Free cash flows                                         $         (23,822)
                                                          ================= 

                               Workday, Inc.
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
                       (A Non-GAAP Financial Measure)
                               (in thousands)
                                (unaudited)

                                                           Trailing Twelve
                                                             Months Ended
                                                           October 31, 2012 
                                                          ----------------- 
GAAP cash flows from operating activities                 $          (1,369)
Capital expenditures                                                 (8,060)
Property and equipment acquired under capital lease                 (22,728)
                                                          ----------------- 
  Free cash flows                                         $         (32,157)
                                                          ================= 


    
About Non-GAAP Financial Measures 

    To provide investors and others with additional information regarding
Workday's results, we have disclosed the following non-GAAP financial
measures: non-GAAP operating loss, non-GAAP net loss, non-GAAP net loss
per share, non-GAAP operating margin, free cash flows and trailing
twelve-month free cash flows. Workday has provided a reconciliation of
each non-GAAP financial measure used in this earnings release to the most
directly comparable GAAP financial measure. These non-GAAP financial
measures, other than free cash flows, differ from GAAP in that they
exclude share-based compensation and, for the third quarter of fiscal
2013, a one-time charge related to the contribution of 500,000 shares of
common stock to the Workday Foundation. Free cash flows differ from GAAP
cash flows from operating activities in that it treats capital
expenditures and assets acquired under a capital lease as a reduction to
cash flows. 

    Workday's management uses these non-GAAP financial measures to understand
and compare operating results across accounting periods, for internal
budgeting and forecasting purposes, for short- and long-term operating
plans, and to evaluate Workday's financial performance and the ability of
operations to generate cash. Management believes these non-GAAP financial
measures reflect Workday's ongoing business in a manner that allows for
meaningful period-to-period comparisons and analysis of trends in
Workday's business, as they exclude expenses that are not reflective of
ongoing operating results. Management also believes that these non-GAAP
financial measures provide useful information to investors and others in
understanding and evaluating Workday's operating results and future
prospects in the same manner as management and in comparing financial
results across accounting periods and to those of peer companies.
Additionally, management believes information regarding free cash flows
provides investors and others with an important perspective on the cash
available to make strategic acquisitions and investments, to fund ongoing
operations and to fund other capital expenditures.

    Management believes these non-GAAP financial measures are useful to
investors and others in assessing Workday's operating performance due to
the following factors:


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

    

Additionally, we believe that the non-GAAP financial measure, free
cash flows, is meaningful to investors because we review cash flows
generated from operations after deducting capital expenditures, whether
purchased or leased, due to the fact that these expenditures are
considered to be an ongoing operational component of our business. The
use of non-GAAP financial measures has certain limitations as they do not
reflect all items of income and expense that affect Workday's operations.
Workday compensates for these limitations by reconciling the non-GAAP
financial measures to the most comparable GAAP financial measures. These
non-GAAP financial measures should be considered in addition to, not as a
substitute for or in isolation from, measures prepared in accordance with
GAAP. Further, these non-GAAP measures may differ from the non-GAAP
information used by other companies, including peer companies, and
therefore comparability may be limited. Management encourages investors
and others to review Workday's financial information in its entirety and
not rely on a single financial measure.

    

Investor Relations Contact:
Michael Haase
Workday
(925) 951-9005
Michael.Haase@Workday.com

Media Contact:
Eric Glass
Workday
(415) 432-3056
Eric.Glass@Workday.com 

Copyright 2012, Marketwire, All rights reserved.

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