Workday Announces Fourth Quarter and Full Year Fiscal 2017 Financial Results
PLEASANTON, CA -- (Marketwired) -- 02/27/17 -- Workday, Inc. (NYSE: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fourth quarter and fiscal year ended January 31, 2017.
Fiscal Fourth Quarter Results
- Total revenues were $436.7 million, an increase of 35% from the fourth quarter of fiscal 2016. Subscription revenue was $365.2 million, an increase of 39% from the same period last year.
- Operating loss was $106.2 million, or negative 24.3% of revenues, compared to an operating loss of $73.4 million, or negative 22.7% of revenues, in the same period last year. Non-GAAP operating profit for the fourth quarter was $8.0 million, or 1.8% of revenues, compared to a non-GAAP operating loss of $0.8 million, or negative 0.2% of revenues, in the same period last year.(1)
- Net loss per basic and diluted share was $0.52, compared to a net loss per basic and diluted share of $0.42 in the fourth quarter of fiscal 2016. Non-GAAP net income per diluted share was $0.07, compared to a non-GAAP net loss per basic and diluted share of $0.01 for the same period last year.(1)
Fiscal Year 2017 Results
- Total revenues were $1.57 billion, an increase of 35% from fiscal 2016. Subscription revenue was $1.29 billion, an increase of 39% from the prior year.
- Operating loss was $376.7 million, or negative 24% of revenues, compared to an operating loss of $264.7 million, or negative 22.8% of revenues, in fiscal 2016. Non-GAAP operating profit was $29.0 million, or 1.9% of revenues, compared to a non-GAAP operating loss of $2.7 million, or negative 0.2% of revenues, last year.(1)
- Net loss per basic and diluted share was $2.06, compared to a net loss per basic and diluted share of $1.53 in fiscal 2016. Non-GAAP net income per diluted share was $0.12, compared to a non-GAAP net loss per basic and diluted share of $0.01 last year.(1)
- Operating cash flows were $348.7 million and free cash flows were $227.8 million.(2)
- Cash, cash equivalents and marketable securities were approximately $2.00 billion as of January 31, 2017. Unearned revenues were $1.23 million, a 37% increase from last year.
"In Q4, we delivered the best quarter in company history to close out a very successful fiscal 2017," said Aneel Bhusri, co-founder and CEO, Workday. "Our strong performance was driven by a combination of our industry-leading products and technology, continued high levels of customer satisfaction, and our dedicated Workday team. We believe these are the right areas of focus to achieve another great year for Workday in the year ahead."
"We finished a very strong fiscal 2017 with an excellent fourth quarter. We generated record revenues, and our subscription revenue growth accelerated in the fourth quarter," said Robynne Sisco, chief financial officer, Workday. "As we look ahead to fiscal 2018, we estimate that total revenues will be $2.005 to $2.025 billion or growth of 27-29%, putting us on track to be only the second true cloud company to reach this significant milestone."
Recent Highlights
- Workday held its third annual customer conference in Europe, Workday Rising Europe, bringing together members of the Workday community for education and collaboration in Barcelona.
- Workday selected Amazon Web Services (AWS) as its preferred public cloud infrastructure provider for customer production workloads. Through this partnership, Workday will offer customers the option to run its full suite of applications in the public cloud.
- Workday joined more than 100 companies in signing the White House Equal Pay Pledge as part of Workday's ongoing commitment to close the gender wage gap.
Workday plans to host a conference call today to review its fourth quarter and full year fiscal 2017 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 Workday's Investor Relations site. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 45 days.
Workday intends to use the Workday Blog as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
(1) Non-GAAP operating profit (loss) and non-GAAP net income (loss) per share exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, and debt discount and issuance costs associated with convertible notes. 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 (excluding owned real estate projects). 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 finance and human resources. Founded in 2005, Workday delivers financial management, human capital management, 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.
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 fiscal year revenue projections. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "plans," 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) breaches in our security measures, unauthorized access to our customers' data or disruptions in our data center operations; (ii) our ability to manage our growth effectively; (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) the development of the market for enterprise cloud services; (v) acceptance of our applications and services by customers; (vi) adverse changes in general economic or market conditions; (vii) delays or reductions in information technology spending; (viii) our limited operating history, which makes it difficult to predict future results; 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 (SEC), including our Form 10-Q for the quarter ended October 31, 2016 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 services should make their purchase decisions based upon services, features, and functions that are currently available.
� 2017. 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)
(unaudited)
January 31,
------------------------
2017 2016
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 539,923 $ 300,087
Marketable securities 1,456,822 1,669,372
Accounts receivable, net 383,908 293,407
Deferred costs 27,537 21,817
Prepaid expenses and other current assets 88,336 77,625
----------- -----------
Total current assets 2,496,526 2,362,308
Property and equipment, net 365,877 214,158
Deferred costs, noncurrent 43,310 30,074
Acquisition-related intangible assets, net 48,787 15,491
Goodwill 158,354 50,325
Other assets 53,570 57,738
----------- -----------
Total assets $ 3,166,424 $ 2,730,094
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 26,824 $ 19,605
Accrued expenses and other current liabilities 61,582 43,122
Accrued compensation 110,625 91,211
Unearned revenue 1,097,417 768,741
----------- -----------
Total current liabilities 1,296,448 922,679
Convertible senior notes, net 534,423 507,476
Unearned revenue, noncurrent 135,970 130,988
Other liabilities 36,677 32,794
----------- -----------
Total liabilities 2,003,518 1,593,937
Stockholders' equity:
Common stock 202 193
Additional paid-in capital 2,681,200 2,247,454
Accumulated other comprehensive income 2,071 799
Accumulated deficit (1,520,567) (1,112,289)
----------- -----------
Total stockholders' equity 1,162,906 1,136,157
----------- -----------
Total liabilities and stockholders' equity $ 3,166,424 $ 2,730,094
=========== ===========
Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
January 31, Year Ended January 31,
-------------------- ----------------------
2017 2016 2017 2016
--------- --------- ---------- ----------
Revenues:
Subscription services $ 365,151 $ 261,799 $1,287,104 $ 929,234
Professional services 71,521 61,628 282,303 233,112
--------- --------- ---------- ----------
Total revenues 436,672 323,427 1,569,407 1,162,346
Costs and expenses(1):
Costs of subscription
services 58,165 43,009 213,389 149,869
Costs of professional
services 72,016 59,671 270,156 224,558
Product development 191,556 131,244 680,531 469,944
Sales and marketing 167,657 121,073 583,874 434,056
General and administrative 53,513 41,871 198,122 148,578
--------- --------- ---------- ----------
Total costs and expenses 542,907 396,868 1,946,072 1,427,005
--------- --------- ---------- ----------
Operating loss (106,235) (73,441) (376,665) (264,659)
Other expense, net (2,291) (6,505) (32,427) (24,242)
--------- --------- ---------- ----------
Loss before provision for
(benefit from) income taxes (108,526) (79,946) (409,092) (288,901)
Provision for (benefit from)
income taxes (2,961) 1,182 (814) 1,017
--------- --------- ---------- ----------
Net loss $(105,565) $ (81,128) $ (408,278) $ (289,918)
========= ========= ========== ==========
Net loss per share, basic and
diluted $ (0.52) $ (0.42) $ (2.06) $ (1.53)
========= ========= ========== ==========
Weighted-average shares used
to compute net loss per
share, basic and diluted 201,530 192,485 198,214 190,016
========= ========= ========== ==========
(1) Costs and expenses include
share-based compensation as
follows:
Costs of subscription
services $ 5,936 $ 3,636 $ 20,773 $ 12,060
Costs of professional
services 8,135 5,504 26,833 19,526
Product development 49,279 30,372 166,529 109,362
Sales and marketing 23,786 14,709 86,229 51,617
General and administrative 18,581 15,052 78,265 57,405
Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
January 31, Year Ended January 31,
-------------------- ------------------------
2017 2016 2017 2016
--------- --------- ----------- -----------
Cash flows from operating
activities
Net loss $(105,565) $ (81,128) $ (408,278) $ (289,918)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities:
Depreciation and
amortization 32,646 25,222 115,885 85,939
Share-based compensation
expenses 105,717 69,273 372,272 249,970
Amortization of deferred
costs 7,057 5,728 25,577 23,477
Amortization of debt
discount and issuance
costs 6,876 6,510 26,947 25,518
Gain on sale of cost
method investment -- -- (65) (3,220)
Impairment of cost method
investment -- -- 15,000 --
Other (3,660) 2,381 (1,982) 1,047
Changes in operating
assets and liabilities,
net of business
combinations:
Accounts receivable (113,334) (122,684) (88,639) (105,264)
Deferred costs (21,286) (14,572) (44,533) (33,899)
Prepaid expenses and
other assets (6,744) (3,368) (20,847) (28,366)
Accounts payable 4,256 6,363 6,336 6,824
Accrued expense and
other liabilities (6,252) 23,024 23,367 59,724
Unearned revenue 209,761 181,742 327,615 266,805
--------- --------- ----------- -----------
Net cash provided by (used
in) operating activities 109,472 98,491 348,655 258,637
Cash flows from investing
activities
Purchases of marketable
securities (345,482) (640,419) (1,917,238) (2,125,841)
Maturities of marketable
securities 371,536 639,995 1,986,031 1,901,858
Sales of available-for-sale
securities 41,100 4,000 133,292 102,711
Business combinations, net
of cash acquired -- -- (147,879) (31,436)
Owned real estate projects (21,518) -- (106,997) --
Capital expenditures,
excluding owned real estate
projects (32,278) (41,985) (120,813) (133,667)
Purchases of cost method
investments -- (100) (300) (16,550)
Sales and maturities of cost
method investments 5,000 -- 5,315 3,538
Change in restricted cash 100 -- -- --
Other -- (760) (296) (760)
--------- --------- ----------- -----------
Net cash provided by (used
in) investing activities 18,458 (39,269) (168,885) (300,147)
Cash flows from financing
activities
Proceeds from issuance of
common stock from employee
equity plans 24,812 20,560 58,079 45,656
Principal payments on
capital lease obligations -- (66) -- (3,193)
Other 596 621 1,602 1,646
--------- --------- ----------- -----------
Net cash provided by (used
in) financing activities 25,408 21,115 59,681 44,109
Effect of exchange rate
changes 28 (143) 385 (704)
--------- --------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents 153,366 80,194 239,836 1,895
Cash and cash equivalents at
the beginning of period 386,557 219,893 300,087 298,192
--------- --------- ----------- -----------
Cash and cash equivalents at
the end of period $ 539,923 $ 300,087 $ 539,923 $ 300,087
========= ========= =========== ===========
Supplemental cash flow data
Cash paid for interest $ 3,191 $ 3,204 $ 6,484 $ 6,456
Cash paid for taxes 513 472 5,315 2,124
Non-cash investing and
financing activities:
Vesting of early exercised
stock options $ 437 $ 471 $ 1,802 $ 1,887
Purchases of property and
equipment, accrued but
not paid 27,696 14,052 27,696 14,052
Non-cash additions to
property and equipment 1,112 765 2,094 7,256
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended January 31, 2017
(in thousands, except per share data)
(unaudited)
Amortization
Other of Debt
Share-Based Operating Discount and
Compensation Expenses Issuance
GAAP Expenses (2) Costs Non-GAAP
----------- ------------ --------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 58,165 $ (5,936) $ (160) $ -- $ 52,069
Costs of
professional
services 72,016 (8,135) (312) -- 63,569
Product
development 191,556 (49,279) (6,381) -- 135,896
Sales and
marketing 167,657 (23,786) (858) -- 143,013
General and
administrative 53,513 (18,581) (853) -- 34,079
Operating income
(loss) (106,235) 105,717 8,564 -- 8,046
Operating margin (24.3)% 24.2% 1.9% --% 1.8%
Other income
(expense), net (2,291) -- -- 6,876 4,585
Income (loss)
before provision
for (benefit
from) income
taxes (108,526) 105,717 8,564 6,876 12,631
Provision for
(benefit from)
income taxes (2,961) -- -- -- (2,961)
Net income (loss) $(105,565) $ 105,717 $ 8,564 $ 6,876 $ 15,592
Net income (loss)
per share (1) $ (0.52) $ 0.52 $ 0.04 $ 0.03 $ 0.07
(1) GAAP net loss per share calculated based upon 201,530 basic and diluted
weighted-average shares of common stock. Non-GAAP net income per share
calculated based upon 210,846 diluted weighted-average shares of common
stock.
(2) Other operating expenses include total employer payroll tax-related
items on employee stock transactions of $3.5 million, and amortization
of acquisition-related intangible assets of $5.1 million recorded as
part of product development and sales and marketing expenses.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Three Months Ended January 31, 2016
(in thousands, except per share data)
(unaudited)
Amortization
Other of Debt
Operating Discount and
Share-Based Expenses Issuance
GAAP Compensation (2) Costs Non-GAAP
---------- ------------ --------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 43,009 $ (3,636) $ (88) $ -- $ 39,285
Costs of
professional
services 59,671 (5,504) (137) -- 54,030
Product
development 131,244 (30,372) (2,226) -- 98,646
Sales and
marketing 121,073 (14,709) (328) -- 106,036
General and
administrative 41,871 (15,052) (596) -- 26,223
Operating income
(loss) (73,441) 69,273 3,375 -- (793)
Operating margin (22.7)% 21.5% 1.0% --% (0.2)%
Other income
(expense), net (6,505) -- -- 6,510 5
Income (loss)
before provision
for (benefit
from) income
taxes (79,946) 69,273 3,375 6,510 (788)
Provision for
(benefit from)
income taxes 1,182 -- -- -- 1,182
Net income (loss) $(81,128) $ 69,273 $ 3,375 $ 6,510 $ (1,970)
Net income (loss)
per share (1) $ (0.42) $ 0.36 $ 0.02 $ 0.03 $ (0.01)
(1) Calculated based upon 192,485 basic and diluted weighted-average shares
of common stock.
(2) Other operating expenses include total employer payroll tax-related
items on employee stock transactions of $2.0 million, and amortization
of acquisition-related intangible assets of $1.4 million recorded as
part of product development expenses.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Year Ended January 31, 2017
(in thousands, except per share data)
(unaudited)
Amortization
Other of Debt
Operating Discount and
Share-Based Expenses Issuance
GAAP Compensation (2) Costs Non-GAAP
----------- ------------ --------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 213,389 $ (20,773) $ (730) $ -- $191,886
Costs of
professional
services 270,156 (26,833) (1,199) -- 242,124
Product
development 680,531 (166,529) (18,533) -- 495,469
Sales and
marketing 583,874 (86,229) (3,316) -- 494,329
General and
administrative 198,122 (78,265) (3,302) -- 116,555
Operating income
(loss) (376,665) 378,629 27,080 -- 29,044
Operating margin (24.0)% 24.1% 1.8% --% 1.9%
Other income
(expense), net (32,427) -- -- 26,947 (5,480)
Income (loss)
before provision
for (benefit
from) income
taxes (409,092) 378,629 27,080 26,947 23,564
Provision for
(benefit from)
income taxes (814) -- -- -- (814)
Net income (loss) $(408,278) $ 378,629 $ 27,080 $ 26,947 $ 24,378
Net income (loss)
per share (1) $ (2.06) $ 1.91 $ 0.14 $ 0.13 $ 0.12
(1) GAAP net loss per share calculated based upon 198,214 basic and diluted
weighted-average shares of common stock. Non-GAAP net income per share
calculated based upon 208,453 diluted weighted-average shares of common
stock.
(2) Other operating expenses include total employer payroll tax-related
items on employee stock transactions of $14.3 million, and amortization
of acquisition-related intangible assets of $12.7 million recorded as
part of product development and sales and marketing expenses.
Workday, Inc.
Reconciliation of GAAP to Non-GAAP Data
Year Ended January 31, 2016
(in thousands, except per share data)
(unaudited)
Amortization
Other of Debt
Operating Discount and
Share-Based Expenses Issuance
GAAP Compensation (2) Costs Non-GAAP
----------- ------------ --------- ------------ --------
Costs and
expenses:
Costs of
subscription
services $ 149,869 $ (12,060) $ (414) $ -- $137,395
Costs of
professional
services 224,558 (19,526) (768) -- 204,264
Product
development 469,944 (109,362) (7,201) -- 353,381
Sales and
marketing 434,056 (51,617) (1,482) -- 380,957
General and
administrative 148,578 (57,405) (2,095) -- 89,078
Operating income
(loss) (264,659) 249,970 11,960 -- (2,729)
Operating margin (22.8)% 21.6% 1.0% --% (0.2)%
Other income
(expense), net (24,242) -- -- 25,518 1,276
Income (loss)
before provision
for (benefit
from) income
taxes (288,901) 249,970 11,960 25,518 (1,453)
Provision for
(benefit from)
income taxes 1,017 -- -- -- 1,017
Net income (loss) $(289,918) $ 249,970 $ 11,960 $ 25,518 $ (2,470)
Net income (loss)
per share (1) $ (1.53) $ 1.32 $ 0.06 $ 0.14 $ (0.01)
(1) Calculated based upon 190,016 basic and diluted weighted-average shares
of common stock.
(2) Other operating expenses include total employer payroll tax-related
items on employee stock transactions of $8.8 million, and amortization
of acquisition-related intangible assets of $3.2 million recorded as
part of product development expenses.
Workday, Inc.
Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
(A Non-GAAP Financial Measure)
(in thousands)
(unaudited)
Three Months Ended Year Ended January
January 31, 31,
-------------------- --------------------
2017 2016 2017 2016
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities $ 109,472 $ 98,491 $ 348,655 $ 258,637
Capital expenditures, excluding
owned real estate projects (32,278) (41,985) (120,813) (133,667)
--------- --------- --------- ---------
Free cash flows $ 77,194 $ 56,506 $ 227,842 $ 124,970
========= ========= ========= =========
About Non-GAAP Financial Measures To provide investors and others with additional information regarding Workday's results, we have disclosed the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP net income (loss) per share and free cash flows. Workday has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. The non-GAAP financial measures of non-GAAP operating income (loss) and non-GAAP net income (loss) per share differ from GAAP in that they exclude share-based compensation expenses, employer payroll tax-related items on employee stock transactions, amortization of acquisition-related intangible assets, and non-cash interest expense related to our convertible senior notes. Free cash flows differ from GAAP cash flows from operating activities in that it treats capital expenditures (excluding owned real estate projects) 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 flows generated by normal recurring activities to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures, after our owned real estate projects.
Management believes excluding the following items from the GAAP Condensed Consolidated Statement 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 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. For restricted stock unit awards, the amount of share-based compensation expenses is not reflective of the value ultimately received by the grant recipients. Moreover, 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. Unlike cash compensation, the value of stock options and shares offered under our Employee Stock Purchase Plan, which are elements of our ongoing share-based compensation expenses, is determined using a complex formula that incorporates factors, such as market volatility and forfeiture rates, that are beyond our control.
- 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. 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 the company's operational performance.
Additionally, we believe that the non-GAAP financial measure, free cash flows, is meaningful to investors because we review cash flows generated from or used in operations after deducting certain capital expenditures that are considered to be an ongoing operational component of our business. Capital expenditures deducted from cash flows from operations do not include purchases of land and buildings, and construction costs of our new development center and of other owned buildings. We exclude these owned real estate projects as they are infrequent, non-recurring in nature and distinctly separate from our ongoing business operations. This provides an enhanced view of cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures, after our owned real estate projects.
The use of non-GAAP operating income (loss) and non-GAAP net income (loss) per share 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: James Redfern (650) 463-6288 [email protected] Media Contact: Eric Glass (415) 432-3056 [email protected]
Source: Workday, Inc.