Workday (WDAY) 8-K Workday Announces Fiscal 2020 Second Quarter Financial Results

Exhibit 99.1

Workday Announces Fiscal 2020 Second Quarter Financial Results

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

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

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

PLEASANTON, Calif., Aug. 29, 2019 —Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications forfinance andhuman resources, today announced results for the fiscal 2020 second quarter ended July 31, 2019.

Fiscal 2020 Second Quarter Results

• Total revenues were $887.8 million, an increase of 32.2% from the second quarter of fiscal 2019. Subscription revenue was $757.2 million, an increase of 33.9% from the same period last year.

• Operating loss was $122.5 million, or negative 13.8% of revenues, compared to an operating loss of $89.0 million, or negative 13.2% of revenues, in the same period last year.Non-GAAP operating income for the second quarter was $117.5 million, or 13.2% of revenues, compared to anon-GAAP operating income of $68.1 million, or 10.1% of revenues, in the same period last year.¹

• Net loss per basic and diluted share was $0.53, compared to a net loss per basic and diluted share of $0.40 in the second quarter of fiscal 2019.Non-GAAP net income per diluted share was $0.44 compared to anon-GAAP net income per diluted share of $0.31 in the same period last year.²

• Operating cash flows were $100.3 million compared to $57.6 million in the same period last year.

• Cash, cash equivalents, and marketable securities were $1.93 billion as of July 31, 2019. Unearned revenues were $1.89 billion, a 27.1% increase from the same period last year.

Comments on the News

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

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

Recent Highlights

• Workdayopened its new headquarters in Pleasanton, Calif. The new410,000-square-foot,six-story building was designed to encourage collaboration and will accommodate 2,200 employees as well as Workday’s new customer center.

• Workdaycelebrated theone-year anniversary of its acquisition of Adaptive Insights. In the last year, the two organizations have seen continued business planning momentum, including the addition of more than 800 new Adaptive Insights customers, machine learning advancements, the completion of the first phase of the Adaptive Insights integration with Workday as part of the Power of One, and record attendance at Adaptive Live, the company’s annual customer conference.

• Workdaypublished its commitments to ethical artificial intelligence (AI), which includes six principles that guide how it develops machine learning – a subset of AI – for the enterprise responsibly.

• Fast Company recognized Workday on its inaugural list of the50 Best WorkplacesFor Innovators, which honors organizations that demonstrate a deep commitment to encouraging innovation at all levels.

• Workday became thefirst organization to adhere to the EU Cloud Code of Conduct (CoC) by SCOPE Europe, underscoring the company’s continued commitment to global data protection.

• Workday appointed Carolyn Horne as president of the EMEA region and David Webster as president of the APJ region. In addition, Workday promoted Josh DeFigueiredo to chief security officer.

• Workday released its2019 Global Impact Report, which provides an inside look into the company’s efforts to make a positive impact on the world — from implementing sustainable practices, to creating a better place to work, and empowering positive social impact.

Earnings Call Details

Workday plans to host a conference call today to review its fiscal 2020 second 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 viawebcast. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

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

¹Non-GAAP operating income excludes share-based compensation expenses, employerpayroll tax-related items on employee stock transactions, and amortization expense for acquisition-related intangible assets. See the section titled “AboutNon-GAAP Financial Measures” in the accompanying financial tables for further details.

²Non-GAAP net income per share excludes share-based compensation expenses, employerpayroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangibleassets, non-cash interest expense related to our convertible senior notes, and income tax effects. See the section titled “AboutNon-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, planning, and analytics applications designed for the world’s largest companies, educational institutions, and government agencies. Organizations ranging frommedium-sized businesses to Fortune50 enterprises have selected Workday.

Use ofNon-GAAP Financial Measures

Reconciliations ofnon-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 thesenon-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “AboutNon-GAAP Financial Measures.” A reconciliation of our forward outlook fornon-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 ournon-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 Workday’s ability to integrate acquired companies; strategic investments; fiscal year and third quarter subscription revenue outlook; and ability to prioritize investing in long-term growth initiatives while delivering solid operating margins and cash flow over time. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plans,” “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) risks related to our ability to successfully integrate Adaptive Insights’ operations or failure to achieve the expected benefits of this or any other acquisition or transaction; (ii) our ability to implement our plans, objectives, and other expectations with respect to the Adaptive Insights business or that of any other acquired company; (iii) breaches in our security measures, unauthorized access to our customers’ data or disruptions in our data center operations; (iv) our ability to manage our growth effectively; (v) competitive factors, including pricing pressures, industry consolidation, entry of new competitors and new applications, advancements in technology, and marketing initiatives by our competitors; (vi) the development of the market for enterprise cloud applications and services; (vii) acceptance of our applications and services by customers, including any underlying technology such as machine learning and artificial intelligence; (viii) adverse changes in general economic or market conditions; (ix) the regulatory, economic, and political risks associated with our international operations; (x) delays or reductions in information technology spending; and (xi) changes in sales, which 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 Form10-Q for the quarter ended April 30, 2019 and our future reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. Workday assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

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

^© 2019. Workday, Inc. All rights reserved. Workday and the Workday logo are registered trademarks of Workday, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders.

Workday, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

	July 31, 2019			January 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	619,514		$	638,554
Marketable securities		1,307,006			1,139,864
Trade and other receivables, net		613,425			704,680
Deferred costs		85,557			80,809
Prepaid expenses and other current assets		163,530			136,689
Total current assets		2,789,032			2,700,596
Property and equipment, net		919,523			796,907
Operating leaseright-of-use assets		294,824			—
Deferred costs, noncurrent		182,580			183,518
Acquisition-related intangible assets, net		277,953			313,240
Goodwill		1,389,349			1,379,125
Other assets		138,895			147,360
Total assets	$	5,992,156		$	5,520,746
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	32,540		$	29,093
Accrued expenses and other current liabilities		114,494			123,542
Accrued compensation		192,064			207,924
Unearned revenue		1,796,423			1,837,618
Operating lease liabilities		65,554			—
Current portion of convertible senior notes, net		1,233,189			232,514
Total current liabilities		3,434,264			2,430,691
Convertible senior notes, net		—			972,264
Unearned revenue, noncurrent		89,219			111,652
Operating lease liabilities, noncurrent		243,863			—
Other liabilities		14,525			47,697
Total liabilities		3,781,871			3,562,304
Stockholders’ equity:
Common stock		227			221
Additionalpaid-in capital		4,561,272			4,105,334
Accumulated other comprehensive income (loss)		32,458			(809	)
Accumulated deficit		(2,383,672	)		(2,146,304	)
Total stockholders’ equity		2,210,285			1,958,442
Total liabilities and stockholders’ equity	$	5,992,156		$	5,520,746

Workday, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended July 31,						Six Months Ended July 31,
	2019			2018			2019			2018
Revenues:
Subscription services	$	757,155		$	565,659		$	1,458,179		$	1,087,808
Professional services		130,597			106,061			254,628			202,555
Total revenues		887,752			671,720			1,712,807			1,290,363
Costs and expenses(1):
Costs of subscription services		121,161			87,523			233,630			167,768
Costs of professional services		145,173			112,707			275,923			210,433
Product development		378,122			292,840			725,953			556,424
Sales and marketing		280,200			202,464			553,136			395,235
General and administrative		85,593			65,168			170,048			120,749
Total costs and expenses		1,010,249			760,702			1,958,690			1,450,609
Operating loss		(122,497	)		(88,982	)		(245,883	)		(160,246	)
Other income (expense), net		(106	)		1,613			7,035			(2,235	)
Loss before provision for (benefit from) income taxes		(122,603	)		(87,369	)		(238,848	)		(162,481	)
Provision for (benefit from) income taxes		(1,891	)		(1,213	)		(1,861	)		(1,915	)
Net loss	$	(120,712	)	$	(86,156	)	$	(236,987	)	$	(160,566	)
Net loss per share, basic and diluted	$	(0.53	)	$	(0.40	)	$	(1.05	)	$	(0.75	)
Weighted-average shares used to compute net loss per share, basic and diluted		226,392			215,932			224,857			214,517
(1)    Costs and expenses include share-based compensation expenses as follows:
Costs of subscription services	$	12,001		$	8,521		$	22,416		$	16,398
Costs of professional services		18,991			12,518			35,141			23,310
Product development		105,758			75,354			196,995			143,865
Sales and marketing		42,690			29,367			81,544			54,979
General and administrative		29,781			21,303			58,360			41,170

Workday, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended July 31,						Six Months Ended July 31,
	2019			2018			2019			2018
Cash flows from operating activities
Net loss	$	(120,712	)	$	(86,156	)	$	(236,987	)	$	(160,566	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		67,754			42,226			128,919			80,890
Share-based compensation expenses		208,912			147,063			394,147			279,722
Amortization of deferred costs		22,002			17,061			42,882			33,421
Amortization of debt discount and issuance costs		14,301			17,490			25,888			35,629
Other		11,401			(4,894	)		20,377			(14,183	)
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net		(73,437	)		(104,758	)		83,942			63,944
Deferred costs		(28,207	)		(23,943	)		(46,692	)		(36,549	)
Prepaid expenses and other assets		(1,679	)		(5,446	)		(6,786	)		3,042
Accounts payable		1,047			5,987			2,550			13,941
Accrued expenses and other liabilities		(56,524	)		(15,182	)		(35,121	)		(3,555	)
Unearned revenue		55,461			68,168			(63,637	)		(53,887	)
Net cash provided by (used in) operating activities		100,319			57,616			309,482			241,849
Cash flows from investing activities
Purchases of marketable securities		(582,848	)		(526,216	)		(1,053,902	)		(1,434,342	)
Maturities of marketable securities		385,710			655,205			845,807			1,341,881
Sales of marketable securities		4,551			914,938			55,499			942,297
Owned real estate projects		(34,149	)		(49,537	)		(73,783	)		(88,770	)
Capital expenditures, excluding owned real estate projects		(75,576	)		(53,346	)		(141,111	)		(102,208	)
Business combinations, net of cash acquired		(12,885	)		(26,737	)		(12,885	)		(26,737	)
Purchase of other intangible assets		—			(1,000	)		—			(1,000	)
Purchases ofnon-marketable equity and other investments		(5,516	)		(1,000	)		(7,716	)		(3,400	)
Other		(32	)		—			(9	)		—
Net cash provided by (used in) investing activities		(320,745	)		912,307			(388,100	)		627,721
Cash flows from financing activities
Payments on convertible senior notes		(27	)		(350,005	)		(27	)		(350,005	)
Proceeds from issuance of common stock from employee equity plans		58,085			38,686			61,540			41,297
Other		(107	)		(59	)		(200	)		(116	)
Net cash provided by (used in) financing activities		57,951			(311,378	)		61,313			(308,824	)
Effect of exchange rate changes		75			(162	)		(252	)		(582	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(162,400	)		658,383			(17,557	)		560,164
Cash, cash equivalents, and restricted cash at the beginning of period		787,046			1,037,435			642,203			1,135,654
Cash, cash equivalents, and restricted cash at the end of period	$	624,646		$	1,695,818		$	624,646		$	1,695,818

Workday, Inc.

Reconciliation of GAAP toNon-GAAP Data

Three Months Ended July 31, 2019

(in thousands, except percentages and per share data)

(unaudited)

	GAAP			Share-Based Compensation Expenses			Other Operating Expenses (2)			Amortization of Debt Discount and Issuance Costs			Income Tax Effects (3)			Non-GAAP
Costs and expenses:
Costs of subscription services	$	121,161		$	(12,001	)	$	(11,739	)	$	—		$	—		$	97,421
Costs of professional services		145,173			(18,991	)		(1,233	)		—			—			124,949
Product development		378,122			(105,758	)		(5,380	)		—			—			266,984
Sales and marketing		280,200			(42,690	)		(10,449	)		—			—			227,061
General and administrative		85,593			(29,781	)		(2,021	)		—			—			53,791
Operating income (loss)		(122,497	)		209,221			30,822			—			—			117,546
Operating margin		(13.8	)%		23.6	%		3.4	%		—	%		—	%		13.2	%
Other income (expense), net		(106	)		—			—			14,301			—			14,195
Income (loss) before provision for (benefit from) income taxes		(122,603	)		209,221			30,822			14,301			—			131,741
Provision for (benefit from) income taxes		(1,891	)		—			—			—			24,287			22,396
Net income (loss)	$	(120,712	)	$	209,221		$	30,822		$	14,301		$	(24,287	)	$	109,345
Net income (loss) per share (1)	$	(0.53	)	$	0.92		$	0.14		$	0.06		$	(0.15	)	$	0.44

⁽¹⁾  GAAP net loss per share is calculated based upon 226,392 basic and diluted weighted-average shares of common stock.Non-GAAP net income per share is calculated based upon 247,748 diluted weighted-average shares of common stock.

⁽²⁾  Other operating expenses include amortization of acquisition-related intangible assets of $19.5 million and total employer payrolltax-related items on employee stock transactions of $11.3 million.

⁽³⁾  We utilize a fixed long-term projected tax rate in our computation of thenon-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2020, the projectednon-GAAP tax rate is 17%.

Workday, Inc.

Reconciliation of GAAP toNon-GAAP Data

Three Months Ended July 31, 2018

(in thousands, except percentages and per share data)

(unaudited)

	GAAP			Share-Based Compensation Expenses			Other Operating Expenses (2)			Amortization of Debt Discount and Issuance Costs			Income Tax Effects (3)			Non-GAAP
Costs and expenses:
Costs of subscription services	$	87,523		$	(8,521	)	$	(3,787	)	$	—		$	—		$	75,215
Costs of professional services		112,707			(12,518	)		(519	)		—			—			99,670
Product development		292,840			(75,354	)		(3,960	)		—			—			213,526
Sales and marketing		202,464			(29,367	)		(1,039	)		—			—			172,058
General and administrative		65,168			(21,303	)		(731	)		—			—			43,134
Operating income (loss)		(88,982	)		147,063			10,036			—			—			68,117
Operating margin		(13.2	)%		21.9	%		1.4	%		—	%		—	%		10.1	%
Other income (expense), net		1,613			—			—			17,490			—			19,103
Income (loss) before provision for (benefit from) income taxes		(87,369	)		147,063			10,036			17,490			—			87,220
Provision for (benefit from) income taxes		(1,213	)		—			—			—			16,004			14,791
Net income (loss)	$	(86,156	)	$	147,063		$	10,036		$	17,490		$	(16,004	)	$	72,429
Net income (loss) per share (1)	$	(0.40	)	$	0.68		$	0.05		$	0.08		$	(0.10	)	$	0.31

⁽¹⁾ GAAP net loss per share is calculated based upon 215,932 basic and diluted weighted-average shares of common stock.Non-GAAP net income per share is calculated based upon 237,404 diluted weighted-average shares of common stock.

⁽²⁾  Other operating expenses include amortization of acquisition-related intangible assets of $5.3 million and total employer payrolltax-related items on employee stock transactions of $4.7 million.

⁽³⁾  We utilize a fixed long-term projected tax rate in our computation of thenon-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2019, the projectednon-GAAP tax rate was 17%.

Workday, Inc.

Reconciliation of GAAP toNon-GAAP Data

Six Months Ended July 31, 2019

(in thousands, except percentages and per share data)

(unaudited)

	GAAP			Share-Based Compensation Expenses			Other Operating Expenses (2)			Amortization of Debt Discount and Issuance Costs			Income Tax Effects (3)			Non-GAAP
Costs and expenses:
Costs of subscription services	$	233,630		$	(22,416	)	$	(24,399	)	$	—		$	—		$	186,815
Costs of professional services		275,923			(35,141	)		(4,692	)		—			—			236,090
Product development		725,953			(196,995	)		(19,011	)		—			—			509,947
Sales and marketing		553,136			(81,544	)		(23,283	)		—			—			448,309
General and administrative		170,048			(58,360	)		(5,319	)		—			—			106,369
Operating income (loss)		(245,883	)		394,456			76,704			—			—			225,277
Operating margin		(14.4	)%		23.0	%		4.6	%		—	%		—	%		13.2	%
Other income (expense), net		7,035			—			—			25,888			—			32,923
Income (loss) before provision for (benefit from) income taxes		(238,848	)		394,456			76,704			25,888			—			258,200
Provision for (benefit from) income taxes		(1,861	)		—			—			—			45,755			43,894
Net income (loss)	$	(236,987	)	$	394,456		$	76,704		$	25,888		$	(45,755	)	$	214,306
Net income (loss) per share (1)	$	(1.05	)	$	1.75		$	0.34		$	0.12		$	(0.29	)	$	0.87

⁽¹⁾ GAAP net loss per share is calculated based upon 224,857 basic and diluted weighted-average shares of common stock.Non-GAAP net income per share is calculated based upon 246,610 diluted weighted-average shares of common stock.

⁽²⁾  Other operating expenses include amortization of acquisition-related intangible assets of $38.9 million and total employer payrolltax-related items on employee stock transactions of $37.8 million.

⁽³⁾  We utilize a fixed long-term projected tax rate in our computation of thenon-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2020, the projectednon-GAAP tax rate is 17%.

Workday, Inc.

Reconciliation of GAAP toNon-GAAP Data

Six Months Ended July 31, 2018

(in thousands, except percentages and per share data)

(unaudited)

	GAAP			Share-Based Compensation Expenses			Other Operating Expenses (2)			Amortization of Debt Discount and Issuance Costs			Income Tax Effects (3)			Non-GAAP
Costs and expenses:
Costs of subscription services	$	167,768		$	(16,398	)	$	(8,239	)	$	—		$	—		$	143,131
Costs of professional services		210,433			(23,310	)		(2,220	)		—			—			184,903
Product development		556,424			(143,865	)		(12,757	)		—			—			399,802
Sales and marketing		395,235			(54,979	)		(3,619	)		—			—			336,637
General and administrative		120,749			(41,170	)		(2,598	)		—			—			76,981
Operating income (loss)		(160,246	)		279,722			29,433			—			—			148,909
Operating margin		(12.4	)%		21.7	%		2.2	%		—	%		—	%		11.5	%
Other income (expense), net		(2,235	)		—			—			35,629			—			33,394
Income (loss) before provision for (benefit from) income taxes		(162,481	)		279,722			29,433			35,629			—			182,303
Provision for (benefit from) income taxes		(1,915	)		—			—			—			32,870			30,955
Net income (loss)	$	(160,566	)	$	279,722		$	29,433		$	35,629		$	(32,870	)	$	151,348
Net income (loss) per share (1)	$	(0.75	)	$	1.30		$	0.14		$	0.17		$	(0.22	)	$	0.64

⁽¹⁾ GAAP net loss per share is calculated based upon 214,517 basic and diluted weighted-average shares of common stock.Non-GAAP net income per share is calculated based upon 236,706 diluted weighted-average shares of common stock.

⁽²⁾  Other operating expenses include total employer payrolltax-related items on employee stock transactions of $19.0 million and amortization of acquisition-related intangible assets of $10.4 million.

⁽³⁾  We utilize a fixed long-term projected tax rate in our computation of thenon-GAAP income tax provision to provide better consistency across the interim reporting periods. For fiscal 2019, the projectednon-GAAP tax rate was 17%.

AboutNon-GAAP Financial Measures

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

Workday’s management uses thesenon-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate Workday’s financial performance. Management believes thesenon-GAAP financial measures reflect Workday’s ongoing business in a manner that allows for meaningfulperiod-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 thesenon-GAAP financial measures provide useful information to investors and others in understanding and evaluating Workday’s operating results and prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

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

• Share-based compensation expenses. Although share-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude share-based compensation expenses to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. Share-based compensation expenses are determined using a number of factors, including our stock price, volatility, and forfeiture rates that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses are not reflective of the value ultimately received by the grant recipients.

• Other operating expenses. Other operating expenses includes employer payrolltax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payrolltax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition, and thus we do not believe it is reflective of ongoing operations.

• Amortization of debt discount and issuance costs. Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the convertible senior notes that were issued in private placements in June 2013 and September 2017. Accordingly, for GAAP purposes we are required to recognize the effective interest expense on our convertible senior notes and amortize the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense and the amortization expense of issuance costs are excluded from management’s assessment of our operating performance because management believes that thesenon-cash expenses are not indicative of ongoing operating performance. Management believes that the exclusion of thenon-cash interest expense provides investors an enhanced view of Workday’s operational performance.

• Income tax effects.We utilize a fixed long-term projected tax rate in our computation of thenon-GAAP income tax provision to provide better consistency across the interim reporting periods. In projecting this long-termnon-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of share-based compensation and related employer payroll taxes, amortization of acquisition-related intangible assets, and amortization of debt discount and issuance costs. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. For fiscal 2020 and 2019, we determined the projectednon-GAAP tax rate to be 17%. We will periodicallyre-evaluate this tax rate, as necessary, for significant events, based on our ongoing analysis of the 2017 U.S. Tax Cuts and Jobs Act, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

The use ofnon-GAAP operating income (loss) andnon-GAAP net income (loss) per share measures have certain limitations as they do not reflect all items of income and expense that affect Workday’s operations. Workday compensates for these limitations by reconciling thenon-GAAP financial measures to the most comparable GAAP financial measures. Thesenon-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, thesenon-GAAP measures may differ from thenon-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 Magaro

+1 (925)379-6000

Michael.Magaro@Workday.com

Media Contact:

Nina Oestlien

+1 (415)828-3034

Nina.Oestlien@Workday.com