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Financial Analyst Day

Financial Analyst Day 32
Financial Analyst Day 1 Safe Harbor Statement This presentation contains forwardlooking statements that involve risks, uncertainties, and assumptions. If any of these risks or uncertainties materialize or if any of these assumptions prove incorrect, the results of Workday could differ materially from the results expressed or implied by these forwardlooking statements. All statements other than statements of historical fact could be deemed forwardlooking statements, including any projections of revenues, gross margins, earnings, or other financial items; any statements regarding strategies or plans of management for future operations; any statements concerning new features, enhancements, or upgrades to our existing applications or services or plans for future applications or services; statements about current or future economic conditions; and any statements of belief. The risks and uncertainties referred to above include, but are not limited to, our history of losses and expectations as to future losses, limited operating history, competition, management of growth, development of the market for enterprise cloud computing, market acceptance of our applications and services, breaches of our security measures, fluctuations in our operating results, interruptions or delays in the provision of our services, risks associated with selling to larger enterprise customers, and adverse changes in general economic or market conditions. Further information on risks that could affect the financial results of Workday is included in our filings with the Securities and Exchange Commission which are available on the Workday investor relations webpage: www.workday.com/company/investorrelations.php. Workday assumes no obligation for and does not intend to update any forwardlooking statements. Any unreleased services, features, functionality or enhancements referenced in any Workday document, roadmap, blog, our website, press release or other public statement that are not currently available are subject to change and may not be delivered as planned or at all. Customers who purchase Workday applications and services should make their purchase decisions based upon services, features, and functions that are currently available. Use of NonGAAP Financial Measures This presentation includes nonGAAP financial measures we believe provide investors and others with additional information regarding Workday’s results. Workday has provided a reconciliation of each nonGAAP financial measure used in this presentation to the most directly comparable GAAP financial measure in an Appendix at the end of this presentation. Workday's management uses nonGAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short and longterm operating plans, and to evaluate Workday's financial performance and the ability of operations to generate cash. Management believes the use of nonGAAP financial measures reflects Workday's ongoing business in a manner that allows for meaningful periodtoperiod 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 nonGAAP 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. The use of nonGAAP financial measures has certain limitations as they do not reflect all items of income and expense that affect Workday's operations. NonGAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. Further, nonGAAP measures may differ from the nonGAAP 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. 2 Workday Financial Analyst Day, September 27, 2016 Welcome Mark Peek CoPresident 3 Workday Financial Analyst Day, September 27, 2016 Agenda ► Overview Aneel Bhusri ► Planning and Analytics Mike Frandsen and Pete Schlampp Competitive Differentiation: Field Phil Wilmington ► Architecture Stan Swete and Dan Beck Deployment Jim Bozzini and Annrai O’Toole ► Financials Robynne Sisco ► QA 4 Workday Financial Analyst Day, September 27, 2016 Keynote Review Aneel Bhusri CoFounder and CEO 5 Workday Financial Analyst Day, September 27, 2016 Financial Analyst Day 6 DEMO 7 Workday Financial Analyst Day, September 27, 2016 TM 8 Workday Financial Analyst Day, September 27, 2016 Analytics and Planning Mike Frandsen Pete Schlampp EVP VP Products, Support and Delivery Product Management 9 Workday Financial Analyst Day, September 27, 2016 Workday Strategic Focus Business Management Solutions Planning Analytics Predict Alert Recommend Trend Compare Benchmark Model Strategic Enterprise Administration Systems Strategic HR FIN Processes Core Administrative Systems HR FIN Records, Compliance, Core Processing Back Office Administrators Employees Managers Business Users 10 Workday Financial Analyst Day, September 27, 2016 Financial Planning Priorities 1. Effective planning, budgeting, and forecasting 2. Monitoring and measuring performance Planning, budgeting, 3. Providing input for strategic decision making and forecasting 4. Managing compliance and internal controls ranked 1 5. Managing and mitigating business risk 6. Improving revenue growth opportunity identification 7. Driving continuous enterprise cost reduction 8. Processing transactions 9. Managing shareholder information and relations Source: Finance in the Cloud,” Saugatuck Technology, Dec. ’14 Workday Confidential Differentiating Through Analytics Data Discovery and Data Prep Planning, Budgeting, Forecasting Scorecards, KPIs, Insights Dashboards Functional Operational Reporting Financial Statements 12 Workday Financial Analyst Day, September 27, 2016 What You Need To Manage Your Business Next Manage Operational Data, AdHoc Visual Analytics Planning, Budgeting, Forecasting Scorecards Predictive Analytics Management Reporting Analytics Financial Consolidations Transactional Applications/Data (HR, Finance, Projects, Student) 13 Workday Financial Analyst Day, September 27, 2016 3rd Party Data Competitive Landscape – Planning FINANCIAL PLANNING WORKFORCE PLANNING 14 Workday Confidential Planning at the Center of Our 65Bn+ Opportunity (4) SOFTWARE HEALTHCARE ANALYTICS TECHNOLOGY LEARNING PROFESSIONAL 19Bn+ BUSINESS SERVICES TALENT INSIGHTS FINANCIAL SERVICES (3) PLANNING FINANCIALS (1) HCM 27Bn+ RECRUITING 13Bn+ EDUCATION STUDENT GOVERNMENT 1Bn+ PAYROLL (2) BENEFITS PROJECTS INVENTORY CONNECT 8Bn+ TIME TRACKING PROCUREMENT EXPENSES Sources: (1) Human Capital Management Applications from IDC WW HCM Payroll (3) Financial Applications and Procurement from IDC WW ERM Apps Forecast, 20162020 Applications Forecast, 20162020 (May 2016) US40645216 (June 2016) US41536815 + Inventory and Expenses as per internal Workday estimates (2016 estimates, newly GA products (2) Payroll Applications from report above and Project Portfolio Management from (4) Financial Perf Strategy Mgmt Apps + Workforce Analytic Apps + BI Analytics Tools 15 highlighted in orange) IDC WW ERM Applications Forecast, 20162020 (June 2016) US41536815 from IDC WW Business Analytics Software Forecast, 20162020 (Aug 2016) US41655216 Use Case Driven Requirements Distribution via Desktop, Tablet, Mobile AdHoc Visual Analytics Environment InMemory Storage and Query Engine SelfService Data Preparation Connection to NonWorkday Datasources and Data Ingestion Manage Operational Data, AdHoc Visual Analytics 16 Workday Financial Analyst Day, September 27, 2016 3rd Party Data Analytics on Blended Big Data Sources Current approaches are cumbersome, insecure, stale, and inactionable HR and FIN operational reporting Financial and People Analytics (EPM / CPM / Data Warehouse / Tableau / Excel) Operational systems NonWorkday data HR FIN data 17 Workday Financial Analyst Day, September 27, 2016 Why Platfora Best in class technology Domain expertise in big data, modern BI Endtoend big data analytics solution Designed for the business user Product and vision alignment 18 Workday Financial Analyst Day, September 27, 2016 Building a Native Experience Organize, Find and Data Security Through Selfservice Data Prep Search Data Sources in Native Organization of Workday and non One Location Hierarchies Workday Data Access Data from Any Speed of Thought Device and a Single Visual Analysis and Application Discovery 19 One Location to Organize and Find Data Sources Easily view and select all of your data for analysis Workday and Non Workday data in one location 20 Understanding and Sharing Data Securely Govern your data with security inherited from your organizational hierarchies Provide rich descriptions and see relationships 21 From Raw Data to Analysis: SelfService Data Prep Blend, transform, and enrich Workday and nonWorkday data Designed for business users, data admins, or citizen data scientists 22 Access to All Data on Any Device All data is accessible in detail on any device via Dashboards, Scorecards, and Reports 23 SpeedofThought Visual Analysis Adhoc visual analysis environment to answer any business question Innovative inmemory lens technology for fast and interactive analysis 24 Workday Confidential Roadmap Longterm Nearterm • Blend Workday and nonWorkday Data • AdHoc Visual Analysis • SelfService Data Preparation + Data Catalog • And More… • Secure and Control nonWorkday Data by Organizational Hierarchy • Output to Reports, Dashboards and Scorecards Today SEP 2017 MAR 2018 25 Hello TM Competition: Field Update Phil Wilmington CoPresident 27 Workday Financial Analyst Day, September 27, 2016 Driving Our 65 Billion Opportunity 33,000 Target Customers 65Bn All Customers, All SKUs Current Customers Current Customers Current SKUs Whitespace 1,350+ Current Customers 1Bn 2Bn All SKUs 28 Workday Financial Analyst Day, September 27, 2016 All Customers New Customers in the Last 12 Months 29 Workday Financial Analyst Day, September 27, 2016 Broad Success Across Industries Based on of customers Tech Fin Mfg Healthcare Prof Retail Edu Ins Media Business Energy CPG Non Travel Public Const Other Services Services Comms Services Profit Sector 30 Workday Financial Analyst Day, September 27, 2016 Expanding International Coverage • 18+ Sales Offices • 120+ Sales Representatives Nordics • 17+ of Revenue Japan Benelux Hong Kong UKI ASEAN France Germany Austria Australia Iberia Switzerland New Zealand 31 Workday Financial Analyst Day, September 27, 2016 Sales Deployment Changes Regions Industries Products Specialized Industry Teams Change in Deployment Model 32 Workday Financial Analyst Day, September 27, 2016 Strong Attach Across Key Products 370+ 240+ RECRUITING EXPENSES FY 16 540+ 165+ PAYROLL PROCUREMENT HUMAN CAPITAL FINANCIAL MANAGEMENT MANAGEMENT 510+ TIME TRACKING 33 Workday Financial Analyst Day, September 27, 2016 Strong Attach Across Key Products 690+ 370+ 370+ 240+ RECRUITING EXPENSES FY 17 760+ 240+ 540+ 165+ PAYROLL PROCUREMENT HUMAN CAPITAL FINANCIAL MANAGEMENT MANAGEMENT 750+ 510+ TIME TRACKING 19 50+ LEARNING PLANNING 34 Workday Financial Analyst Day, September 27, 2016 Have We Reached the Tipping Point in Financials “By 2018, at least 25 of new core financial application deployments in large enterprises will be public cloud SaaS.” “Forrester estimates that the market for softwareasaservice (SaaS) applications is currently 52 billion, and it will grow by 24 to 65 billion in 2017.” “Constellation’s recent survey on what ERP customers seek shows how early adopters have already made the shift to the cloud.” Source: Gartner, "Predicts 2016: Financial Management Applications,” by John E. Van Decker, Nigel Rayner, Christopher Iervolino, 23 November 2015. Source::”Breakout Vendors: SaaS Business Applications,” Forrester Research, Inc., May 10, 2016. Source: Constellation Research, “Workday Release 26 Beefs Up Cloud Software for Financial Management,” by R “Ray” Wang, June 09, 2016. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and is used herein with permission. All rights reserved. The Gartner document is available upon request from Workday. All statements in this report attributable to Gartner represent Workday’s interpretation of data, research opinion or viewpoints published as part of a syndicated subscription service by Gartner, Inc., and have not been reviewed by Gartner. Each Gartner publication speaks as of its original publication date (and not as of the date of this presentation). The opinions expressed in Gartner publications are not representations of fact, and are subject to change without notice. 35 Workday Financial Analyst Day, September 27, 2016 Accelerating Platform Sales 27 HUMAN CAPITAL FINANCIAL NA only – MANAGEMENT MANAGEMENT Net new customers 12 FY14 1H FY17 36 Workday Financial Analyst Day, September 27, 2016 Workday Replacement Statistics + + + + 280 395 130 90 Oracle Payroll Providers Ultimate / NetSuite SAP 37 Workday Financial Analyst Day, September 27, 2016 Strong Competitive Position Why Workday Wins Wins Against Competition Proven system with 1 95+ customer satisfaction Lowest deployment risk with 2 70+ customers live Other 30 Referenceable customer base with Legacy 3 quantifiable impact ERP 70 Great ownership experience 4 Lower TCO 5 38 Workday Financial Analyst Day, September 27, 2016 TM 39 Workday Financial Analyst Day, September 27, 2016 Competition: Architecture Stan Swete Dan Beck Chief Technology Officer SVP Product Marketing and Technology Strategy 40 Workday Financial Analyst Day, September 27, 2016 What’s The Difference We’re all saying the same things Unified HCM Doing frequent and FIN updates In the cloud Actionable analytics Mobile first design for “delightful” user experience Are we all the same 41 Workday Financial Analyst Day, September 27, 2016 42 The Power of One Employee Data Organizational Data Payroll Data HR HR data drives crucial enterprise process ERP Budgeting Accounting Activity Approvals Controls Security 43 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 3. Single codeline 4. Generated UI 5. Single security model 6. Concurrent Read/Write 7. Native workflow 44 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 3. Single codeline 30 12 Acquisitions Acquisitions 4. Generated UI (Taleo 9) (SFSF 5) 5. Single security model 19Bn 18Bn 6. Concurrent Read/Write 7. Native workflow 45 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 3. Single codeline 4. Generated UI 5. Single security model 6. Concurrent Read/Write 7. Native workflow 46 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 3. Single codeline 4. Generated UI 14 5. Single security model Hours / week 6. Concurrent Read/Write 7. Native workflow 47 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 0 45 3. Single codeline 4. Generated UI 5. Single security model 6. Concurrent Read/Write 7. Native workflow 48 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors Encryption optional 1. Pureplay cloud and 2. Metadata and abstraction 25 extra 3. Single codeline and 4. Generated UI Selective only 5. Single security model 6. Concurrent Read/Write 7. Native workflow 49 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle Point of Differentiation Workday SAP HANA Success Netsuite Ultimate Fusion Factors 1. Pureplay cloud 2. Metadata and abstraction 3. Single codeline 4. Generated UI 5. Single security model 6. Concurrent Read/Write 7. Native workflow 50 Workday Financial Analyst Day, September 27, 2016 Selected Architectural Differences SAP Oracle SAP S/4 Point of Differentiation Workday Success Netsuite Ultimate Fusion HANA Factors 1. Pureplay cloud 2. Metadata and abstraction 8 Workflow engines…+1 3. Single codeline Approvals = 4. Generated UI Only 9 Workflow engines 5. Single security model 6. Concurrent Read/Write 7. Native workflow 51 Workday Financial Analyst Day, September 27, 2016 Why Architecture Matters to Customers Continuous changes Proven performance Transactions and by the customer: and scalability: Analytics together: • With continuous • To make the software fit • Insight into the business improvement to both the business • Analytics that drive • To keep up with changes decisionmaking to the business without getting stuck 52 Workday Financial Analyst Day, September 27, 2016 Proven Performance Proven performance and scalability 1200 1000 Live Customers 140+ with 20K employees 800 400 0 9/12 11/12 1/13 3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 11/14 1/15 3/15 5/15 7/15 9/15 11/15 1/16 3/16 5/16 7/16 53 Workday Financial Analyst Day, September 27, 2016 Performance Request Volume Proven performance vs. Response Time and scalability 3.5 3,000 3.0 2,500 2.5 2,000 2.0 1,500 1.5 1,000 1.0 500 0.5 0.0 0 Average Response Time (s) Total UI Request 54 Workday Financial Analyst Day, September 27, 2016 Response Time in Seconds of UI Requests Millions The Path to Zero Downtime Proven performance and scalability 23 1,350+ HOURS CUSTOMERS Average Update Time 330+ CUSTOMERS 3.75 HOURS Customers Performance: SLA Comparison Proven performance and scalability UPTIME SLA EXCLUSIONS TO 99.5 PERFORMANCE 99.5 None Yes 99.5 5 Days No Emergency maintenance Major maintenance 2/yr 99.5 No Data Center Migrations 2 Days 99.5 No Track Qtrly Emergency 99.5 No Track Qtrly 56 Workday Financial Analyst Day, September 27, 2016 Questions for the Competition Proven performance and scalability How many live customers do you have running core HCM or Financial Management in the cloud with 20,000 Employees With 100,000 Employees 1 Do you have a performance SLA 2 What is your median transaction response time across all cloud customers 3 57 Workday Financial Analyst Day, September 27, 2016 Why Architecture Matters to Customers Continuous changes Proven performance Transactions and by the customer: and scalability: Analytics together: • With continuous • To make the software fit • Insight into the business improvement to both the business • Analytics that drive • To keep up with changes decisionmaking to the business without getting stuck 58 Workday Financial Analyst Day, September 27, 2016 Transactions and Analytics Together Transactions and Analytics together 59 Workday Financial Analyst Day, September 27, 2016 Hybrid Transactional / Analytical Processing Transactions and Analytics together Traditional Transactional / Analytical Processing IMCEnabled Hybrid Transactional / Analytical Processing Transactions Analytics ` TP Operational Database Data Integration Data Warehouse HTAP Application Data Mart InMemory Data Store BI Source: Gartner, “Hybrid Transaction/Analytical Processing Will Foster Opportunities for Dramatic Business Innovation,” by Massimo Pezzini, Donald Feinberg, Nigel Rayner, Roxane Edjlali, January 28, 2014 60 Workday Financial Analyst Day, September 27, 2016 Questions for the Competition Transactions and Analytics together Can large reports be run on the latest data without blocking updates 1 Do your analytics use the same security model as your transactions 2 Can you take action on data in a report 3 61 Workday Financial Analyst Day, September 27, 2016 Why Architecture Matters to Customers Continuous changes Proven performance Transactions and by the customer: and scalability: Analytics together: • With continuous • To make the software fit • Insight into the business improvement to both the business • Analytics that drive • To keep up with changes decisionmaking to the business without getting stuck 62 Workday Financial Analyst Day, September 27, 2016 Application Changes by Workday Continuous change Now 1,350+ CUSTOMERS GA All on the same version PSA Planning Procurement Learning Payroll UK Inventory FIN Recruiting Student Insights Cloud Payroll Expenses Cloud Integration Payroll Grants Student Payroll Student HCM Time Big Data Admissions France Suite Recruiting Apps Connect Connect U.S. Cloud Canada Tracking Mgmt. Analytics rd 3 Party Payroll Benefits 20062011 2012 2013 2014 2015 2016 63 Workday Financial Analyst Day, September 27, 2016 Changes Created By Customers Continuous change 3200+ 460+ 300+ Delivered Reports Delivered Business Delivered Integrations Process Definitions +262K +160K 1.2M Custom Business Total Integrations Custom Reports Process Definitions 64 Workday Financial Analyst Day, September 27, 2016 Supporting Business Change Continuous change Large MA Large Restructuring Serial MA + 5 acquisitions in 5 years + + “Without Workday I don’t think we’d have been able to accomplish the merging and transition of HR 13 acquisitions in 7 years between the two companies in such an efficient “Today, we are able to commit to the business way in only 8 weeks.” that, on the day the acquisition closes, all acquired employees will be in Workday.” + + “As our organization undergoes significant change, merging with another company, 9 acquisitions in 5 years having an agile technology foundation is crucial.” 65 Architecture Evolution Continuous change 66 Workday Financial Analyst Day, September 27, 2016 UI Service Evolution Continuous change HTML5 Flex HTML 2005 2010 Today 67 Workday Financial Analyst Day, September 27, 2016 Persistence Evolution Continuous change Main tenanted data store Distributed, highly available Data from external systems Large scale data processing, Nontraditional schema K/V store Big Data processing machine learning evolved over time Documents, attachments Insight applications External data import processing 68 Workday Financial Analyst Day, September 27, 2016 Questions for the Competition Continuous change Do you have a single data model, workflow engine, and security model across all offerings and all customers 1 Are all configurations (e.g. custom reports, workflows, integrations) converted to the latest update without customer involvement 2 Do your customers have to choose between customizations and staying on the current update 3 69 Workday Financial Analyst Day, September 27, 2016 Live, referenceable, successful customers Power of 70 Workday Financial Analyst Day, September 27, 2016 Competition: Deployment Jim Bozzini Annrai O’Toole EVP Chief Technology Officer Customer Operations Europe 71 Workday Financial Analyst Day, September 27, 2016 Business Process Framework Workday Technology Enables Rapid Deployments Integrations User Experience 70+ Live Enhanced Tooling 72 Workday Financial Analyst Day, September 27, 2016 Ecosystem Growth 6 Certified Resources Current 5 4 3 2 1 0 FY14 FY17 FY15 FY16 (projected) 73 Workday Financial Analyst Day, September 27, 2016 Thousands Most Experienced Partners 6 Certified Resources Current 5 4 3 2 1 0 FY14 FY17 FY15 FY16 (projected) 74 Workday Financial Analyst Day, September 27, 2016 Thousands Commercial Customer Average Time to Live Months 14 Customers 3Bn 12 10 8 6 Customers 3Bn 4 2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 FY 2017 FY 2016 Based on deployment start date and actual/projected initial golive 75 Workday Financial Analyst Day, September 27, 2016 Components of a Workday Deployment FOUNDATION 76 Workday Financial Analyst Day, September 27, 2016 Innovation: Three Elements of Success CAPABILITIES USEFULNESS OWNERSHIP Functional Increase Usage Little talked about Total Addressable Market Stickiness “Underbelly” 77 Workday Financial Analyst Day, September 27, 2016 Workday A Visual 78 Workday Financial Analyst Day, September 27, 2016 Effort Drivers Tenant Data Management Management Transactional Reference Data Data Configuration Management It’s like a 1,000,000 piece jigsaw 79 Workday Financial Analyst Day, September 27, 2016 Ownership Innovation Objectives Reduce overall effort Eliminate largest Higher win rate and deployment cost barrier of entry OWNERSHIP 80 Workday Financial Analyst Day, September 27, 2016 Current State of the Problem Professional Services 10x Software HW SW Infrastructure Infrastructure Operations Customer Application Support 10 x 1.0x On Premise Legacy Cloud Early Workday Workday Today Workday Future 81 Workday Financial Analyst Day, September 27, 2016 Indicative Cost Ratios Approach to Empowering Customer Selfenablement Friendly data Automate repetitive Friendly configuration management technical tasks content management Consumer UI Instrumentation for observation and diagnostics 82 Workday Financial Analyst Day, September 27, 2016 What We’ve Done Comprehensive Tools and Applications Prescriptive Implementation Methodologies Workday Delivered… Customer CloudLoader OX Central Initial Tenant Configuration Tenant Building Customer Data Configuration Loading Migration Workday Technology Stack Production Tenant Big Data Service 83 Workday Financial Analyst Day, September 27, 2016 Results to Date Time (in hours) Tasks (number) Pre “tooling” 183 Post “tooling” 1 Pre “tooling” Post “tooling” 32 1.2 84 Workday Financial Analyst Day, September 27, 2016 Multiple Benefits New Tooling Driving down cost complexity Consultants Customers 85 Workday Financial Analyst Day, September 27, 2016 DEMO 86 Workday Financial Analyst Day, September 27, 2016 TM 87 Workday Financial Analyst Day, September 27, 2016 Financial Update Robynne Sisco Chief Financial Officer 88 Workday Financial Analyst Day, September 27, 2016 Focus Area 1: Growth 89 A Different View of Our 65 Billion Opportunity 33,000 Target Customers 65Bn All Customers, All SKUs Current Customers Current Customers Current SKUs Whitespace 1,350+ Current Customers 1Bn 2Bn All SKUs 90 Workday Financial Analyst Day, September 27, 2016 All Customers Our 65Bn+ Opportunity (4) SOFTWARE HEALTHCARE ANALYTICS TECHNOLOGY LEARNING PROFESSIONAL 19Bn+ BUSINESS SERVICES TALENT INSIGHTS FINANCIAL SERVICES (3) PLANNING FINANCIALS (1) HCM 27Bn+ RECRUITING 13Bn+ STUDENT EDUCATION GOVERNMENT 1Bn+ PAYROLL (2) BENEFITS PROJECTS INVENTORY CONNECT 8Bn+ TIME TRACKING PROCUREMENT EXPENSES Sources: (1) Human Capital Management Applications from IDC WW HCM Payroll (3) Financial Applications and Procurement from IDC WW ERM Apps Forecast, 20162020 Applications Forecast, 20162020 (May 2016) US40645216 (June 2016) US41536815 + Inventory and Expenses as per internal Workday estimates (2016 estimates, newly GA products (2) Payroll Applications from report above and Project Portfolio Management from (4) Financial Perf Strategy Mgmt Apps + Workforce Analytic Apps + BI Analytics Tools 91 highlighted in orange) IDC WW ERM Applications Forecast, 20162020 (June 2016) US41536815 from IDC WW Business Analytics Software Forecast, 20162020 (Aug 2016) US41655216 Our 65Bn Opportunity in Context The largest segment in cloud enterprise software… …A small fraction of IT spending 1.3 Tn 36 4 30 IaaS + SaaS 17 Growing 40 9 8 ERM CRM Collaboration Content Other Source: IDC 2016 Source: Pacific Crest Securities, “The Second Decade of SaaS Rise of Smart Applications,” by Brent Bracelin, Monika Garg, Jason Celino, Trevor Upton, and Alyssa Johnson, September 12, 2016 92 Workday Financial Analyst Day, September 27, 2016 Significant Expansion Opportunity Beyond Core 4.00+ Payroll Time Tracking Benefits Recruiting Represents Learning Subset of all available Planning addons Expenses Procurement Projects 2.00 Inventory Core FIN Core FIN 1.00 Core HCM Core HCM Core HCM Core HCM 93 Workday Financial Analyst Day, September 27, 2016 Demonstrated Strong Attach Rates 60 Payroll 50 Time Tracking 40 Recruiting 30 20 Projects 10 0 FY 12 FY 13 FY 14 FY 15 FY 16 94 Workday Financial Analyst Day, September 27, 2016 Delivering Growth at Scale 1,091M TTM Subscription Revenue 132M Growth Q2 FY13 Q2 FY14 Q2 FY15 Q2 FY16 Q2 FY17 1,387M TTM Subscription 236M Billings Growth Q2 FY13 Q2 FY14 Q2 FY15 Q2 FY16 Q2 FY17 95 Workday Financial Analyst Day, September 27, 2016 Focus Area 2: Predictability 96 Eight Consecutive Quarters of 100+ Renewal 100+ 100+ 100+ 100+ 100+ 100+ 100+ 100+ Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 8 of billings 10 of billings 97 Workday Financial Analyst Day, September 27, 2016 Unearned Revenue and Backlog Supports Visibility Backlog ST Unearned Revenue LT Unearned Revenue 2.5Bn 0.7Bn FY 13 FY 14 FY 15 FY 16 98 Workday Financial Analyst Day, September 27, 2016 Focus Area 3: Profitability 99 Efficient Customer Acquisition CAC (GAAP TTM Average) 2.6 x 2.4x 1.6x 1.5x 1.4x Source: Goldman Sachs Wall Street Equity Research, Standalone SaaS Companies with 500M ARR, “Benchmarking Software: Efficient Models Outperforming YTD,” September 13, 2016 100 Workday Financial Analyst Day, September 27, 2016 Strong Lifetime Value 1 ARR 9 LTV 101 Workday Financial Analyst Day, September 27, 2016 Gross Margin (NonGAAP) Subscription Gross Margin 85.2 84.5 84.3 81.1 79.7 FY 13 FY 14 FY 15 FY 16 1H FY 17 Services Gross Margin 16.8 14.6 12.4 11.0 8.8 FY 13 FY 14 FY 15 FY 16 1H FY 17 102 Workday Financial Analyst Day, September 27, 2016 Operating Expenses of Rev Sales Marketing Product Development General Administrative Operating Expenses Rev Operating Expenses Rev Operating Expenses Rev 11 44 36 39 34 9 36 32 31 8 33 8 30 31 7 FY 13 FY 14 FY 15 FY 16 1H FY 17 FY 13 FY 14 FY 15 FY 16 1H FY 17 FY 13 FY 14 FY 15 FY 16 1H FY 17 103 Workday Financial Analyst Day, September 27, 2016 Demonstrating Leverage at Scale 1 NonGAAP TTM Operating Margin Scaling with Growth 319M 41 Strong Momentum in TTM Operating Cash Flows 2M Q2 FY13 Q2 FY14 Q2 FY15 Q2 FY16 Q2 FY17 104 Workday Financial Analyst Day, September 27, 2016 Strong Balance Sheet (As of 7/31/16) Bn Assets Cash Marketable Securities 2.1 Other Current Assets 0.3 Other Assets 0.4 Total Assets 2.8 Liabilities Current Liabilities 0.2 Unearned Revenue 1.0 Convertible Notes 0.5 Total Liabilities 1.7 Stockholders’ Equity Total Stockholders’ Equity 1.1 105 Workday Financial Analyst Day, September 27, 2016 LongTerm Model (NonGAAP) Today LongTerm FY12 1HFY2017 Target 75 Gross Margin 52 72 +20 +3 SM 52 31 as of Revenue Product Development 45 31+ as of Revenue GA 10 7 as of Revenue 20+ Operating Margin ( 55) 2+ +57 +18 106 Workday Financial Analyst Day, September 27, 2016 Hello TM TM TM Subscription Services Gross Margin GAAP to NonGAAP Reconciliation (in thousands) FY13 FY14 FY15 FY16 H1 FY17 Subscription Services 190,320 354,169 613,328 929,234 586,231 Revenue Cost of Subscription 39,251 69,195 102,476 149,869 100,579 Services Subscription Services 79 80 83 84 83 Gross Margin NonGAAP Adjustments: ShareBased (601) (2,408) (6,053) (12,060) (9,365) Compensation (1) Other 0 (17) (204) (414) (452) Cost of Subscription 38,650 66,770 96,219 137,395 90,762 Services (NonGAAP) Subscription Services Gross Margin (Non 80 81 84 85 85 GAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 110 Workday Confidential Professional Services Gross Margin GAAP to NonGAAP Reconciliation (in thousands) FY13 FY14 FY15 FY16 H1 FY17 Professional Services 83,337 114,769 174,532 233,112 136,922 Revenue Cost of Professional 77,284 107,615 162,327 224,558 125,900 Services Professional Services 7 6 7 4 8 Gross Margin NonGAAP Adjustments: ShareBased (1,312) (4,818) (12,890) (19,526) (11,262) Compensation (1) Other 0 (656) (451) (768) (716) Cost of Professional 75,972 102,141 148,986 204,264 113,922 Services (NonGAAP) Professional Services Gross Margin (Non 9 11 15 12 17 GAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 111 Workday Confidential Sales and Marketing Operating Expense GAAP to NonGAAP Reconciliation (in thousands) FY13 FY14 FY15 FY16 H1 FY17 Revenue 273,657 468,938 787,860 1,162,346 723,153 Sales and Marketing 123,440 197,373 315,840 434,056 266,668 Expense Expense as of Sales 45 42 40 37 37 NonGAAP Adjustments: ShareBased (2,717) (12,131) (29,875) (51,617) (39,846) Compensation (1) Other 0 (883) (1,420) (1,482) (1,797) Sales and Marketing 120,723 184,359 284,545 380,957 225,025 Expense (NonGAAP) Expense as of Sales 44 39 36 33 31 (NonGAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 112 Workday Confidential Product Development Operating Expense GAAP to NonGAAP Reconciliation (in thousands) FY13 FY14 FY15 FY16 H1 FY17 Revenue 273,657 468,938 787,860 1,162,346 723,153 Product Development 102,665 182,116 316,868 469,944 303,664 Expense Expense as of Sales 38 39 40 40 42 NonGAAP Adjustments: ShareBased (3,528) (21,644) (63,938) (109,362) (71,282) Compensation (1) Other 0 (1,544) (3,221) (7,201) (6,360) Product Development 99,137 158,928 249,709 353,381 226,022 Expense (NonGAAP) Expense as of Sales 36 34 32 30 31 (NonGAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 113 Workday Confidential General and Administrative Operating Expense GAAP to NonGAAP Reconciliation (in thousands) FY13 FY14 FY15 FY16 H1 FY17 Revenue 273,657 468,938 787,860 1,162,346 723,153 General and Administrative 48,880 65,921 106,051 148,578 86,888 Expense Expense as of Sales 18 14 13 13 12 NonGAAP Adjustments: ShareBased (7,170) (20,850) (43,292) (57,405) (34,702) Compensation (1) Other (11,250) (1,298) (1,202) (2,095) (1,736) General and Administrative 30,460 43,773 61,557 89,078 50,450 Expense (NonGAAP) Expense as of Sales 11 9 8 8 7 (NonGAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 114 Workday Confidential TTM Operating Margin GAAP to NonGAAP Reconciliation Q2 FY13 Q2 FY14 Q2 FY15 Q2 FY16 Q2 FY17 (in thousands) TTM TTM TTM TTM TTM Revenue 199,128 353,337 616,255 974,996 1,351,846 Operating Loss (88,850) (136,453) (202,227) (222,894) (304,161) Operating Margin (45) (39) (33) (23) (22) NonGAAP Adjustments: ShareBased (6,265) (28,799) (114,308) (198,430) (304,389) Compensation (1) Other 0 (12,763) (5,447) (10,164) (16,793) Operating Income (82,585) (94,891) (82,472) (14,300) 17,021 (Loss) (NonGAAP) Operating Margin (41) (27) (13) (1) 1 (NonGAAP) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 115 Workday Confidential Long Term Model GAAP to NonGAAP Reconciliations – FY12 Share As of As of (1) (in thousands) GAAP based Other NonGAAP Revenue Revenue Comp Revenue 134,427 134,427 Cost of Revenue 65,368 (628) 64,740 Gross Margin 51 52 Sales and Marketing 70,356 52 (839) 69,517 52 Product Development 62,014 46 (1,124) 60,890 45 General and 15,133 11 (1,591) 13,542 10 Administrative Operating Margin (58) (55) (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 116 Workday Confidential Long Term Model GAAP to NonGAAP Reconciliations – H1 FY17 Share As of As of (1) (in thousands) GAAP based Other NonGAAP Revenue Revenue Comp Revenue 723,153 723,153 Cost of Revenue 226,479 (20,627) (1,168) 204,684 Gross Margin 69 72 Sales and Marketing 266,668 37 (39,846) (1,797) 225,025 31 Product Development 303,664 42 (71,282) (6,360) 226,022 31 General and 86,888 12 (34,702) (1,736) 50,450 7 Administrative Operating Margin (22) 2 (1) – Includes employer payroll taxrelated items on employee stock transactions and amortization of acquisition related intangible assets 117 Workday Confidential