Workday(US:WDAY)2024-05-29 20:09Financial Performance - Total revenues for the three months ended April 30, 2024, were $1.99 billion, an increase of 18% from $1.68 billion in the same period of 2023[124]. - Subscription services revenues reached $1.82 billion, up 19% from $1.53 billion year-over-year, driven by new customer acquisition and strong retention rates[135]. - GAAP operating income improved to $64 million, compared to a loss of $20 million in the prior year, reflecting a 421% increase[124]. - Non-GAAP operating income increased to $515 million, or 25.9% of revenues, up from $396 million, or 23.5% of revenues, in the prior year[151]. - Other income increased by $33 million to $59 million, primarily due to higher interest income from marketable securities[154]. - Free cash flows improved to $291 million for the three months ended April 30, 2024, compared to $218 million in the prior year[169]. Costs and Expenses - Total costs and expenses rose to $1.93 billion, an increase of 13% from $1.70 billion, primarily due to higher employee-related expenses[137]. - Product development expenses were $656 million, reflecting a 9% increase from $600 million, driven by higher average headcount[142]. - Sales and marketing expenses increased to $573 million, a 10% rise from $519 million, attributed to higher employee-related costs and increased sales commissions[144]. - General and administrative expenses increased by $41 million, or 25%, to $208 million for the three months ended April 30, 2024, compared to $168 million in the prior year[146]. - Share-based compensation expenses rose by $16 million to $385 million, representing 19.3% of total revenues, down from 21.9% in the prior year[148]. Cash Flow and Investments - Operating cash flows for the quarter were $372 million, a 34% increase from $277 million in the same quarter last year[124]. - Cash provided by operating activities was $372 million for the three months ended April 30, 2024, compared to $277 million in the prior year[163]. - Cash used in investing activities was $258 million, primarily for the acquisition of HiredScore and capital expenditures[164]. - Cash used in financing activities was $367 million, consisting of $239 million in taxes related to equity awards and $128 million in stock repurchases[167]. - The company expects capital expenditures to be approximately $330 million in fiscal 2025 to support growth initiatives[166]. - As of April 30, 2024, the company reported cash, cash equivalents, and marketable securities totaling $7.2 billion, down from $7.8 billion as of January 31, 2024[188]. Market and Economic Conditions - Economic conditions, including inflation and geopolitical factors, have created uncertainty, but demand for the company's products remains strong with gross and net retention rates over 95% and 100%, respectively[122]. - An immediate increase or decrease of 100 basis points in interest rates would have resulted in an approximately $54 million market value reduction or increase in the investment portfolio as of April 30, 2024[190]. - The company has significant foreign currency exposure, particularly to the euro, British pound, Canadian dollar, and Australian dollar, as of April 30, 2024[186]. Risk Management - The company enters into foreign currency derivative hedging transactions to mitigate risks associated with foreign currency exchange fluctuations[187]. - Borrowings under the 2022 Credit Agreement bear interest at variable rates, exposing the company to market risk from changes in underlying index rates[192]. - The fair values of the Senior Notes are exposed to interest rate risk, increasing as interest rates fall and decreasing as interest rates rise[191]. - The company’s future investment income may fluctuate due to changes in interest rates, potentially leading to losses in principal if securities decline in market value[189]. Strategic Plans - The company plans to continue investing heavily in product development and expanding its global sales organization, particularly in Europe and Asia-Pacific[119]. - The company excludes share-based compensation expenses and acquisition-related costs from non-GAAP financial measures to provide a clearer view of operational performance[35]. - The company evaluates its critical accounting policies regularly, with no significant changes reported during the three months ended April 30, 2024[183].