PROBLEM 7: Sales Productivity & Efficiency sy. PANTEL cost (kosa Cost-ing price of Read One Number to Manage Your SaaS Sales &Marketing Spend: The CAC ratio" - by Bessemer Ventures To Read The unprofitable SaaS business model trap" - by Jason Cohen Review Workday's non-GAAP financial data and answer the key questions below: Three Months Ended January 31. 2012 Revenues $ 81,519 43.158 Year Ended January 31, 2013 2012 273,657 S 134,427 2013 S Workday, Inc. Reconciliation of GAAP to Non-GAAP Data For the Year Ended January 31, 2013 (in thousands, except per share data) (unaudited) Equity Grant to Workday Foundation Share-Based Compensation GAAP Non-GAAP as adjusted Costs and expenses: Costs of revenues: Subscription services Professional services Total costs of revenues S $ S s 39,251 77,284 116.535 (601) (1,312) (1,913) 38,650 75.972 114,622 Research and development Sales and marketing General and administrative 102,665 123,440 48,880 (3,528) (2,717) (7,170) 99.137 120.723 30,460 (11.250) Operating loss (117,863) 15,328 11,250 (91,285) Operating margin (43.1%) 5.6% 4.1% (33.4%) Loss before provision for income taxes (119,066) 15,328 11.250 (92,488) Provision for income taxes 124 124 Net loss S (119,190) S 15,328 $ 11.250 $ (92,612) s (1.62) $ 0.21 0.15 s (1.26) Net loss per share attributable to common stockholders, for Class A and Class B, basic and diluted (1) (1) Cakulated based upon 74,011 basic and diluted weighted-average shares for Class A and Class B common stock Workday, Inc. Reconciliation of GAAP to Non-GAAP Data For Year Ended January 31, 2012 in thousands, except per share data) (unaudited) Share-Based Compensation Non-GAAP as adjusted GAAP Costs and expenses: Costs of revenues: Subscription services Professional services Total costs of revenues $ 22,342 43,026 65,368 S (230) (398) (628) $ 22,112 42.628 64,740 Research and development Sales and marketing General and administrative 62.014 70.356 15.133 (1,124) (839) (1,591) 60,890 69,517 13,542 Operating loss Operating margin (78,444) (58.3%) 4.182 3.7% (74,262) (55.2%) Loss before provision for income taxes (79,462) 4,182 (75,280) Provision for income taxes 167 167 Net loss S (79.629) $ 4,182 $ (75,447) $ (2.71) s 0.14 $ (2.57) Net loss per share attributable to common stockholders, for Class A and Class B, basic and diluted (1) (1) Calculated based upon 29,478 haste and diluted weighted average shares for Class A and Class B common stock Calculate: i. CAC ratio for Workday for year ended JAN 31, 2013. ii. Compare Workday's performance against Cohen's analysis below: Say the average customer represents R dollars in annual revenue. That's: 1 . $4R of revenue over the lifetime of the customer. But: $1.5R is spent to acquire the customer (the pay-back period). $1.2R is spent in gross margin to service the customer (4 years times 30% cost). $0.6R spent on R&D (15% over 4 years). $0.6R spent on Admin (15% over 4 years). . Calculate: i. CAC ratio for Workday for year ended JAN 31, 2013. ii. Compare Workday's performance against Cohen's analysis below: Say the average customer represents R dollars in annual revenue. That's: + $4R of revenue over the lifetime of the customer. But: $1.5R is spent to acquire the customer (the pay-back period). $1.2R is spent in gross margin to service the customer (4 years times 30% cost). $0.6R spent on R&D (15% over 4 years). $0.6R spent on Admin (15% over 4 years). So out of the original $4R, we're left with $0.1R in profit. That's 1/40th of the revenue making its way to actual bottom-line profitability, and even that takes 4 years to achieve. iii. What in Workday's cost structure do you think is driving Workday's stock performance? Oct 19, 2012 - Mar 26, 2013 +12.56 (25.8%) 65 60 55 50 J G Mar 2013 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 PROBLEM 7: Sales Productivity & Efficiency sy. PANTEL cost (kosa Cost-ing price of Read One Number to Manage Your SaaS Sales &Marketing Spend: The CAC ratio" - by Bessemer Ventures To Read The unprofitable SaaS business model trap" - by Jason Cohen Review Workday's non-GAAP financial data and answer the key questions below: Three Months Ended January 31. 2012 Revenues $ 81,519 43.158 Year Ended January 31, 2013 2012 273,657 S 134,427 2013 S Workday, Inc. Reconciliation of GAAP to Non-GAAP Data For the Year Ended January 31, 2013 (in thousands, except per share data) (unaudited) Equity Grant to Workday Foundation Share-Based Compensation GAAP Non-GAAP as adjusted Costs and expenses: Costs of revenues: Subscription services Professional services Total costs of revenues S $ S s 39,251 77,284 116.535 (601) (1,312) (1,913) 38,650 75.972 114,622 Research and development Sales and marketing General and administrative 102,665 123,440 48,880 (3,528) (2,717) (7,170) 99.137 120.723 30,460 (11.250) Operating loss (117,863) 15,328 11,250 (91,285) Operating margin (43.1%) 5.6% 4.1% (33.4%) Loss before provision for income taxes (119,066) 15,328 11.250 (92,488) Provision for income taxes 124 124 Net loss S (119,190) S 15,328 $ 11.250 $ (92,612) s (1.62) $ 0.21 0.15 s (1.26) Net loss per share attributable to common stockholders, for Class A and Class B, basic and diluted (1) (1) Cakulated based upon 74,011 basic and diluted weighted-average shares for Class A and Class B common stock Workday, Inc. Reconciliation of GAAP to Non-GAAP Data For Year Ended January 31, 2012 in thousands, except per share data) (unaudited) Share-Based Compensation Non-GAAP as adjusted GAAP Costs and expenses: Costs of revenues: Subscription services Professional services Total costs of revenues $ 22,342 43,026 65,368 S (230) (398) (628) $ 22,112 42.628 64,740 Research and development Sales and marketing General and administrative 62.014 70.356 15.133 (1,124) (839) (1,591) 60,890 69,517 13,542 Operating loss Operating margin (78,444) (58.3%) 4.182 3.7% (74,262) (55.2%) Loss before provision for income taxes (79,462) 4,182 (75,280) Provision for income taxes 167 167 Net loss S (79.629) $ 4,182 $ (75,447) $ (2.71) s 0.14 $ (2.57) Net loss per share attributable to common stockholders, for Class A and Class B, basic and diluted (1) (1) Calculated based upon 29,478 haste and diluted weighted average shares for Class A and Class B common stock Calculate: i. CAC ratio for Workday for year ended JAN 31, 2013. ii. Compare Workday's performance against Cohen's analysis below: Say the average customer represents R dollars in annual revenue. That's: 1 . $4R of revenue over the lifetime of the customer. But: $1.5R is spent to acquire the customer (the pay-back period). $1.2R is spent in gross margin to service the customer (4 years times 30% cost). $0.6R spent on R&D (15% over 4 years). $0.6R spent on Admin (15% over 4 years). . Calculate: i. CAC ratio for Workday for year ended JAN 31, 2013. ii. Compare Workday's performance against Cohen's analysis below: Say the average customer represents R dollars in annual revenue. That's: + $4R of revenue over the lifetime of the customer. But: $1.5R is spent to acquire the customer (the pay-back period). $1.2R is spent in gross margin to service the customer (4 years times 30% cost). $0.6R spent on R&D (15% over 4 years). $0.6R spent on Admin (15% over 4 years). So out of the original $4R, we're left with $0.1R in profit. That's 1/40th of the revenue making its way to actual bottom-line profitability, and even that takes 4 years to achieve. iii. What in Workday's cost structure do you think is driving Workday's stock performance? Oct 19, 2012 - Mar 26, 2013 +12.56 (25.8%) 65 60 55 50 J G Mar 2013 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013