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PLEASANTON, CA -- (Marketwired) -- 11/24/14 -- Workday, Inc. (NYSE: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal third quarter ended October 31, 2014.

• Total revenues were $215.1 million, an increase of 68% from the third quarter of fiscal 2014. Subscription revenues were $164.4 million, an increase of 75% from same period last year.
  
  
• Operating loss was $51.5 million, or negative 23.9% of revenues, compared to an operating loss of $40.4 million, or negative 31.6% of revenues, in the same period last year. Non-GAAP operating loss for the third quarter was $2.9 million, or negative 1.4% of revenues, compared to a non-GAAP operating loss of $19.9 million last year, or negative 15.6% of revenues.(1)
  
  
• Net loss per basic and diluted share was $0.33, compared to a net loss per basic and diluted share of $0.27 in the third quarter of fiscal 2014. The non-GAAP net loss per basic and diluted share for the third quarter was $0.03, compared to a non-GAAP net loss per basic and diluted share of $0.12 during the same period last year.(1)
  
  
• Operating cash flows for the third quarter were $41.0 million and free cash flows were $13.3 million. For the trailing twelve months, operating cash flows were $88.5 million and free cash flows were a negative $4.8 million.(2)
  
  
• Cash, cash equivalents and marketable securities were approximately $1.8 billion as of October 31, 2014. Unearned revenue was $508.1 million, a 44% increase from last year.
  
  

"We had a strong third quarter and saw increasing customer demand globally," said Aneel Bhusri, co-founder and CEO, Workday. "We also welcomed a record number of customers to our eighth annual customer conference, Workday Rising, where we announced our newest suite of applications, Workday Insight Applications, to deepen the value our customers gain with one system in the cloud for finance and human resources."

"We are very pleased with our solid third quarter results," said Mark Peek, chief financial officer, Workday. "We generated record quarterly revenues and trailing twelve month operating cash flows. Looking ahead, we anticipate fourth quarter total revenues to be within a range of $219 and $222 million, or growth of 54% to 56% as compared to the prior year."

Recent Highlights

• Workday held its eighth annual customer conference, Workday Rising, bringing together more than 4,500 members of the Workday community for education and collaboration in San Francisco.
  
  
• Workday introduced Workday Insight Applications, a new suite of applications that will use the power of advanced data science and machine learning algorithms to help customers make smarter financial and workforce decisions. Workday is scheduled to make select Workday Insight Applications generally available to customers in calendar year 2015.
  
  
• Workday Financial Management momentum continued as the company surpassed the 100-customer milestone. Additionally, in its latest feature release, Workday 23, Workday unveiled Composite Reporting, an advanced reporting tool, as well as industry-specific functionality to further address the finance needs of large organizations.
  
  

Workday plans to host a conference call today to review its third quarter 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 company's Investor Relations website at www.workday.com/investorrelations. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 45 days.

(1) Non-GAAP operating loss and net loss per share for the fiscal third quarters of 2015 and 2014 exclude share-based compensation, employer payroll taxes on employee stock transactions and debt discount and issuance costs associated with convertible notes, and for the fiscal third quarter of 2015, also exclude amortization expense for acquisition-related intangible assets. 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, assets acquired under a capital lease and purchased other intangible assets. 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. Hundreds of 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 fourth quarter revenue projections. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," 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 July 31, 2014 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.

© 2014. 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)

                                                  October 31,   January 31,
                                                     2014         2014(1)
                                                 ------------  ------------
Assets
Current assets:
  Cash and cash equivalents                      $    192,142  $    581,326
  Marketable securities                             1,642,517     1,305,253
  Accounts receivable, net                            118,943        92,184
  Deferred costs                                       19,024        16,446
  Prepaid expenses and other current assets            37,120        28,449
                                                 ------------  ------------
Total current assets                                2,009,746     2,023,658
Property and equipment, net                           116,640        77,664
Deferred costs, noncurrent                             18,342        20,797
Goodwill and acquisition-related intangible
 assets, net                                           35,079         8,488
Other assets                                           52,511        45,658
                                                 ------------  ------------
Total assets                                     $  2,232,318  $  2,176,265
                                                 ============  ============
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                               $      9,610  $      6,212
  Accrued expenses and other current liabilities       34,508        17,999
  Accrued compensation                                 47,510        55,620
  Capital leases                                        4,681         9,377
  Unearned revenue                                    441,324       332,682
                                                 ------------  ------------
Total current liabilities                             537,633       421,890
Convertible senior notes, net                         484,855       468,412
Capital leases, noncurrent                                 --         3,589
Unearned revenue, noncurrent                           66,807        80,883
Other liabilities                                      13,807        14,274
                                                 ------------  ------------
Total liabilities                                   1,103,102       989,048
Stockholders' equity:
  Common stock                                            185           181
  Additional paid-in capital                        1,891,872     1,761,156
  Accumulated other comprehensive income                   64           269
  Accumulated deficit                                (762,905)     (574,389)
                                                 ------------  ------------
Total stockholders' equity                          1,129,216     1,187,217
                                                 ------------  ------------
Total liabilities and stockholders' equity       $  2,232,318  $  2,176,265
                                                 ============  ============

(1) Amounts as of January 31, 2014 were derived from the January 31, 2014
    audited financial statements.



                               Workday, Inc.

              Condensed Consolidated Statements of Operations
                   (in thousands, except per share data)
                                (unaudited)

                                  Three Months Ended     Nine Months Ended
                                      October 31,           October 31,
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Revenues:
  Subscription services          $ 164,403  $  93,925  $ 431,462  $ 243,454
  Professional services             50,667     33,947    130,125     83,618
                                 ---------  ---------  ---------  ---------
Total revenues                     215,070    127,872    561,587    327,072
                                 ---------  ---------  ---------  ---------
Costs and expenses(1):
  Costs of subscription services    27,426     18,076     73,258     49,333
  Costs of professional services    44,363     30,515    121,590     76,711
  Product development               85,270     49,349    227,905    126,799
  Sales and marketing               80,681     54,051    227,371    136,565
  General and administrative        28,796     16,280     76,781     42,970
                                 ---------  ---------  ---------  ---------
Total costs and expenses           266,536    168,271    726,905    432,378
                                 ---------  ---------  ---------  ---------
Operating loss                     (51,466)   (40,399)  (165,318)  (105,306)
Other expense, net                  (8,047)    (6,893)   (21,999)   (10,628)
                                 ---------  ---------  ---------  ---------
Loss before provision for income
 taxes                             (59,513)   (47,292)  (187,317)  (115,934)
Provision for income taxes             399        242      1,199        593
                                 ---------  ---------  ---------  ---------
Net loss                         $ (59,912) $ (47,534) $(188,516) $(116,527)
                                 =========  =========  =========  =========
Net loss per share, basic and
 diluted                         $   (0.33) $   (0.27) $   (1.03) $   (0.68)
                                 =========  =========  =========  =========
Weighted-average shares used to
 compute net loss per share,
 basic and diluted                 184,310    174,385    182,770    171,269
                                 =========  =========  =========  =========

(1) Costs and expenses include
 share-based compensation as
 follows:
    Costs of subscription
     services                    $   1,959  $     783  $   4,622  $   1,446
    Costs of professional
     services                        4,214      1,559      9,931      2,835
    Product development             19,191      7,032     46,796     12,404
    Sales and marketing              8,678      4,583     22,807      7,431
    General and administrative      12,966      5,726     32,508     12,766



                               Workday, Inc.

              Condensed Consolidated Statements of Cash Flows
                               (in thousands)
                                (unaudited)

                              Three Months Ended       Nine Months Ended
                                  October 31,             October 31,
                             --------------------  ------------------------
                                2014       2013        2014         2013
                             ---------  ---------  -----------  -----------
Cash flows from operating
 activities
Net loss                     $ (59,912) $ (47,534) $  (188,516) $  (116,527)
Adjustments to reconcile net
 loss to net cash provided by
 operating activities:
Depreciation and amortization   15,682      9,361       42,679       23,981
Share-based compensation
 expenses                       47,008     19,683      116,664       36,882
Amortization of deferred
 costs                           5,740      3,211       14,113        8,449
Amortization of debt discount
 and issuance costs              6,083      5,764       18,005        8,554
Other                            1,808         86        2,654          256
Changes in operating assets
 and liabilities, net of
 business combinations:
  Accounts receivable          (18,598)   (19,997)     (27,052)     (19,674)
  Deferred costs                (4,340)    (5,346)     (14,236)     (12,449)
  Prepaid expenses and other
   assets                        1,586     (2,652)      (8,512)     (12,794)
  Accounts payable               4,056      1,891        1,603        5,563
  Accrued expense and other
   liabilities                  15,271     16,458        1,760       22,720
  Unearned revenue              26,658     26,151       94,566       66,509
                             ---------  ---------  -----------  -----------
Net cash provided by
 operating activities           41,042      7,076       53,728       11,470
Cash flows from investing
 activities
Purchases of marketable
 securities                   (454,219)  (499,787)  (1,490,404)  (1,229,488)
Maturities of marketable
 securities                    368,984    256,240    1,136,456      833,107
Sales of available-for-sale
 securities                         --         --        8,138           --
Business combinations, net of
 cash acquired                      --         --      (26,317)          --
Purchases of property and
 equipment                     (27,699)   (16,757)     (65,981)     (48,384)
Purchase of cost method
 investment                         --         --      (10,000)          --
Other                               --         --        1,000           90
                             ---------  ---------  -----------  -----------
Net cash (used in) investing
 activities                   (112,934)  (260,304)    (447,108)    (444,675)
Cash flows from financing
 activities
Proceeds from borrowings on
 convertible senior notes,
 net of issuance costs              --         --           --      584,291
Proceeds from issuance of
 warrants                           --         --           --       92,708
Purchase of convertible
 senior notes hedges                --         --           --     (143,729)
Proceeds from issuance of
 common stock from employee
 equity plans                    2,615      2,637       20,780        9,312
Principal payments on capital
 lease obligations              (1,123)    (2,817)      (8,285)      (9,505)
Shares repurchased for tax
 withholdings on vesting of
 restricted stock                   --       (637)      (8,291)        (637)
Other                               91         41          151          121
                             ---------  ---------  -----------  -----------
Net cash provided by (used
 in) financing activities        1,583       (776)       4,355      532,561
Effect of exchange rate
 changes                          (183)        32         (159)         (54)
                             ---------  ---------  -----------  -----------
Net increase (decrease) in
 cash and cash equivalents     (70,492)  (253,972)    (389,184)      99,302
Cash and cash equivalents at
 the beginning of period       262,634    437,432      581,326       84,158
                             ---------  ---------  -----------  -----------
Cash and cash equivalents at
 the end of period           $ 192,142  $ 183,460  $   192,142  $   183,460
                             =========  =========  ===========  ===========



                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                    Three Months Ended October 31, 2014
                   (in thousands, except per share data)
                                (unaudited)

                                                      Amortization
                                             Other       of Debt
                                           Operating  Discount and
                              Share-Based   Expenses    Issuance     Non-
                    GAAP     Compensation     (2)         Costs      GAAP
                  --------   ------------  ---------  ------------ -------
Costs and
 expenses:
Costs of
 subscription
 services         $ 27,426   $     (1,959) $     (13) $         -- $25,454
Costs of
 professional
 services           44,363         (4,214)       (69)           --  40,080
Product
 development        85,270        (19,191)      (628)           --  65,451
Sales and
 marketing          80,681         (8,678)      (485)           --  71,518
General and
 administrative     28,796        (12,966)      (330)           --  15,500
Operating loss     (51,466)        47,008      1,525            --  (2,933)
Operating margin     (23.9)%         21.9%       0.6%           --    (1.4)%
Other expense, net  (8,047)            --         --         6,083  (1,964)
Loss before
 provision for
 income taxes      (59,513)        47,008      1,525         6,083  (4,897)
Provision for
 income taxes          399             --         --            --     399
Net loss          $(59,912)  $     47,008  $   1,525  $      6,083 $(5,296)
Net loss per
 share, basic and
 diluted (1)      $  (0.33)  $       0.26  $    0.01  $       0.03 $ (0.03)

(1) Calculated based upon 184,310 basic and diluted weighted-average shares
    of common stock.
(2) Other operating expenses include employer payroll taxes on employee
    stock transactions and amortization of acquisition-related intangible
    assets.



                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                    Three Months Ended October 31, 2013
                   (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        $ 18,076   $       (783) $      --  $         -- $ 17,293
Costs of
 professional
 services          30,515         (1,559)      (164)           --   28,792
Product
 development       49,349         (7,032)      (390)           --   41,927
Sales and
 marketing         54,051         (4,583)       (87)           --   49,381
General and
 administrative    16,280         (5,726)      (188)           --   10,366
Operating loss    (40,399)        19,683        829            --  (19,887)
Operating margin    (31.6)%         15.4%       0.6%           --    (15.6)%
Other expense,
 net               (6,893)            --         --         5,764   (1,129)
Loss before
 provision for
 income taxes     (47,292)        19,683        829         5,764  (21,016)
Provision for
 income taxes         242             --         --            --      242
Net loss         $(47,534)  $     19,683  $     829  $      5,764 $(21,258)
Net loss per
 share, basic and
 diluted (1)     $  (0.27)  $       0.11  $      --  $       0.04 $  (0.12)

(1) Calculated based upon 174,385 basic and diluted weighted-average shares
    of common stock.
(2) Other operating expenses include employer payroll taxes on employee
    stock transactions.



                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                    Nine Months Ended October 31, 2014
                   (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       $  73,258   $     (4,622) $    (101) $         -- $ 68,535
Costs of
 professional
 services         121,590         (9,931)      (204)           --  111,455
Product
 development      227,905        (46,796)    (2,098)           --  179,011
Sales and
 marketing        227,371        (22,807)      (996)           --  203,568
General and
 administrative    76,781        (32,508)      (688)           --   43,585
Operating loss   (165,318)       116,664      4,087            --  (44,567)
Operating
 margin             (29.4)%         20.8%       0.7%           --     (7.9)%
Other expense,
 net              (21,999)            --         --        18,005   (3,994)
Loss before
 provision for
 income taxes    (187,317)       116,664      4,087        18,005  (48,561)
Provision for
 income taxes       1,199             --         --            --    1,199
Net loss        $(188,516)  $    116,664  $   4,087  $     18,005 $(49,760)
Net loss per
 share, basic
 and diluted
 (1)            $   (1.03)  $       0.64  $    0.02  $       0.10 $  (0.27)

(1) Calculated based upon 182,770 basic and diluted weighted-average shares
    of common stock.
(2) Other operating expenses include employer payroll taxes on employee
    stock transactions and amortization of acquisition-related intangible
    assets.



                               Workday, Inc.
                  Reconciliation of GAAP to Non-GAAP Data
                    Nine Months Ended October 31, 2013
                   (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       $  49,333   $     (1,446) $      (8) $         -- $ 47,879
Costs of
 professional
 services          76,711         (2,835)      (511)           --   73,365
Product
 development      126,799        (12,404)      (940)           --  113,455
Sales and
 marketing        136,565         (7,431)      (470)           --  128,664
General and
 administrative    42,970        (12,766)      (413)           --   29,791
Operating loss   (105,306)        36,882      2,342            --  (66,082)
Operating
 margin             (32.2)%         11.3%       0.7%           --    (20.2)%
Other expense,
 net              (10,628)            --         --         8,554   (2,074)
Loss before
 provision for
 income taxes    (115,934)        36,882      2,342         8,554  (68,156)
Provision for
 income taxes         593             --         --            --      593
Net loss        $(116,527)  $     36,882  $   2,342  $      8,554 $(68,749)
Net loss per
 share, basic
 and diluted
 (1)            $   (0.68)  $       0.22  $    0.01  $       0.05 $  (0.40)

(1) Calculated based upon 171,269 basic and diluted weighted-average shares
    of common stock.
(2) Other operating expenses include employer payroll taxes on employee
    stock transactions.

                               Workday, Inc.
    Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
                       (A Non-GAAP Financial Measure)
                               (in thousands)
                                (unaudited)

                                  Three Months Ended    Nine Months Ended
                                      October 31,           October 31,
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
GAAP cash flows from operating
 activities                      $  41,042  $   7,076  $  53,728  $  11,470
Capital expenditures               (27,699)   (16,757)   (65,981)   (48,384)
Property and equipment acquired
 under capital lease                    --         --         --       (115)
                                 ---------  ---------  ---------  ---------
  Free cash flows                $  13,343  $  (9,681) $ (12,253) $ (37,029)
                                 =========  =========  =========  =========


                                                          Trailing Twelve
                                                           Months Ended
                                                            October 31,
                                                       --------------------
                                                          2014       2013
                                                       ---------  ---------
GAAP cash flows from operating
 activities                                            $  88,521  $  17,410
Capital expenditures                                     (78,322)   (57,479)
Property and equipment acquired
 under capital lease                                          --       (945)
Purchase of other intangible
 assets                                                  (15,000)        --
                                                       ---------  ---------
  Free cash flows                                      $  (4,801) $ (41,014)
                                                       =========  =========

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 loss, non-GAAP net 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 non-GAAP operating loss and non-GAAP net loss per share differ from GAAP in that they exclude share-based compensation, employer payroll taxes on employee stock transactions, amortization of acquisition-related intangible assets and non-cash interest expense related to our convertible senior notes, as applicable. Free cash flows differ from GAAP cash flows from operating activities in that it treats capital expenditures, assets acquired under a capital lease and purchased other (non-acquisition related) intangible assets as a reduction to cash flows.

Workday's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, and 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 available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.

Management believes excluding the following items from the most directly comparable GAAP measures is useful to investors and others in assessing Workday's operating performance due to the following factors:

• Share-based compensation. 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 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 share 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 the Employee Stock Purchase Plan, which is an element 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 included employer payroll taxes on employee stock transactions for the three and nine months ended October 31, 2014 and 2013 and amortization of acquisition-related intangible assets for the three and nine months ended October 31, 2014. The amount of employer payroll taxes on share-based compensation 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 the 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 capital expenditures, whether purchased or leased, and purchased other intangible assets, due to the fact that these expenditures are considered to be an ongoing operational component of our business. This provides an enhanced view of cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.

The use of non-GAAP operating loss and net loss per share 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.