Summary
Workday began fiscal 2022 with total revenue of $1.18 billion, up 15.4% from the prior-year quarter. The company still posted a GAAP operating loss, but that loss narrowed to $38.3 million from the prior-year quarter. GAAP operating margin improved to negative 3.3% from the prior-year quarter. Net loss narrowed to $46.5 million from the prior-year quarter, and diluted EPS narrowed to negative $0.19 from the prior-year quarter. Operating cash flow was $452.4 million, up 71.6% from the prior-year quarter. Current deferred revenue was $2.36 billion, up 17.3% from the prior-year quarter. On a non-GAAP basis, operating income was $288.5 million, or 24.6% of revenues, compared with $130.5 million, or 12.8% of revenues, in the prior-year quarter. Non-GAAP net income per diluted share was $0.87, compared with $0.44.
The quarter included several operational moves. Workday completed its acquisition of Peakon ApS, an employee success platform, and now operates it as Peakon, a Workday company. Management plans to increase global headcount by more than 20%, or more than 2,500 hires, in fiscal 2022. That includes 400 new jobs at the European headquarters in Dublin and more than 250 new roles in Atlanta. Workday also reported a customer satisfaction rating of 97% from its latest survey of named support contacts. The company delivered its Workday 2021 R1 feature release, which added functionality in spend and supplier management, more personalized experiences in Workday People Experience, and advances in Workday Extend. Subscription services accounted for 88% of total revenues for the quarter and represented 96% of total unearned revenue as of April 30, 2021.
Backlog metrics showed double-digit growth. The 24-month subscription revenue backlog was $6.59 billion, up 19.5% from the prior-year period. Total subscription revenue backlog was $10.08 billion, up 23.0%. Management tied the backlog strength to continued demand and said it expects new bookings to accelerate this fiscal year. Guidance was raised. For the full fiscal year 2022, Workday now expects subscription revenue of $4.425 billion to $4.440 billion, growth of 17%. For the next quarter, the company guided second-quarter subscription revenue to $1.095 billion to $1.097 billion, growth of 18%. Workday also raised its full-year fiscal 2022 non-GAAP operating margin guidance to a range of 18% to 19%.
The margin story carries a warning. Management said the favorable margin impact in the first quarter came from revenue growth outpacing headcount growth and moderation of operating expenses in response to the COVID-19 pandemic. It does not expect that extent of favorable margin impact to continue long-term because it remains committed to investing in the business. Workday plans to reinvest a significant portion of incremental revenues and expects product development, sales and marketing, and general and administrative expenses as a percentage of total revenues to decrease over the longer term. Near-term costs will rise as the company invests in hiring, data center capacity, and new market opportunities.
Risks remain tied to the pandemic and to execution. Workday said the COVID-19 pandemic continues to create uncertainty in most industries and has impacted its ability to generate new business. If economic uncertainty persists, it may continue to see a negative impact on new business, customer renewals, sales and marketing efforts, revenue growth rates, customer deployments, customer solvency, product development, or other financial metrics. The company also faces risks from integrating Peakon, security breaches, service outages, delays in deployments, competition and pricing pressures, regulatory changes, and delays or reductions in information technology spending. Its 2022 Notes are convertible at the option of holders during the second quarter of fiscal 2022, and Workday may receive additional conversion requests that require settlement. The company ended the quarter with a GAAP operating loss, and it expects the favorable margin factors from the quarter to moderate as investments ramp.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.18B | $1.13B | +3.8% | $1.02B | +15.4% |
| Research & development | $441.6M | $439.1M | +0.6% | $443.5M | -0.4% |
| Sales & marketing | $326.5M | $335.2M | -2.6% | $318.6M | +2.5% |
| General & administrative | $112.2M | $117.6M | -4.6% | $95.2M | +17.9% |
| Total operating expenses | $1.21B | $1.20B | +0.7% | $1.16B | +4.3% |
| Operating income (loss) | -$38.3M | -$73.3M | +47.7% | -$144.5M | +73.5% |
| Operating margin | -3.3% | -6.5% | +3.2 pp | -14.2% | +10.9 pp |
| Net income (loss) | -$46.5M | -$71.7M | +35.1% | -$158.4M | +70.6% |
| Net margin | -4.0% | -6.3% | +2.4 pp | -15.6% | +11.6 pp |
| Diluted EPS | -$0.19 | — | — | — | — |
Risks
In April 2021, a malicious third party accessed the development environment of recently acquired Peakon through a security breach at a software provider and took a copy of Peakon's source code. Workday engaged an external cybersecurity firm, law enforcement, and a third-party code review, but cannot assure no future impact from this or similar incidents.
The ongoing COVID-19 pandemic continues to drive global economic volatility and has delayed prospective customer purchasing decisions, reduced demand in travel and hospitality and healthcare, and may reduce renewal rates among small and medium-sized planning customers. MD&A states Workday continues to experience unfavorable impacts to new subscription bookings and reduced its fiscal 2022 subscription revenue outlook.
Workday acquired Peakon in fiscal 2022 and expects to continue acquisitions, which could divert management attention, require integration of security and technology infrastructure, and lead to impairment of acquired goodwill. The Peakon source code breach illustrates execution and security risks from acquired businesses.
Workday's typical sales cycles are six to twelve months but can extend for eighteen months or more, including due to COVID-19. Because subscription services revenue is generally recognized over three years or longer, a decline in new or renewed contracts in a quarter may only negatively affect future quarters.
Subscription pricing is largely based on customers' employee headcount, so customer reductions in force or insolvencies during the pandemic could reduce subscription services revenues upon renewal or outside the renewal period despite base minimums.
Competition is intense for engineers with machine learning and artificial intelligence, cybersecurity, and senior sales experience, especially in the San Francisco Bay Area. If perceived value of equity awards declines or flexible work policies do not meet expectations, Workday may be unable to attract, train, and retain highly skilled employees.
Workday has $1.15 billion of 0.25% convertible senior notes due October 1, 2022, and the notes are convertible at holder option in the second quarter of fiscal 2022 since the early conversion trigger was met. Additional conversion requests could require settlement, and the credit agreement includes a leverage ratio covenant.
MD&A reports GAAP operating margin was (3.3)% for the three months ended April 30, 2021, up from (14.2)% in the prior-year period, but says Workday does not anticipate the favorable margin impact to continue long-term as it remains committed to investing in the business.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Subscription Revenue Backlog
Non-GAAP Operating Income
24-Month Subscription Revenue Backlog
Subscription Revenue
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.