THE$PATH$TO$IPO$ $WORKDAY,$Inc.$ OPEXENGINE SAAS BENCHMARKING COMMUNITY WHITEPAPER All data in this report has been gathered from public sources

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1 THE$PATH$TO$IPO$ $WORKDAY,$Inc.$ OPEXENGINE SAAS BENCHMARKING COMMUNITY WHITEPAPER All data in this report has been gathered from public sources

2 About OPEXEngine: OPEXEngine is the industry leader in delivering financial and operating benchmarks for the technology industries, with a particular expertise in the metrics for subscription-based companies. OPEXEngine s member-based benchmarking community supplies the comprehensive data for the annual benchmarking. OPEXEngine s benchmarking reports are key tools used by senior operating executives to support the budgeting, strategic planning and investment process. OPEXEngine has the most comprehensive database of financial and operating data for early stage and private companies, as well as for mid-sized public companies, many of which started benchmarking with OPEXEngine before completing an IPO. In addition, OPEXEngine s On Demand, EDGR Financial Insights Reports deliver company and industry peer group reports in the areas of Valuation Comparisons, Revenue Comparisons, Cost and Expense Comparisons, Employee Productivity Comparisons, Profitability Analysis Comparisons, Working Capital Comparisons and Cash Flow and Balance Sheet Comparisons for any US public company, created on the fly in minutes. For further information, visit About this Report: This report was prepared through independent research using each company s S-1, 10-K, and 10-Q fillings, and OPEXEngine s EdgarEngine to analyze and interpret the data. In addition, annual reports and other resources such as news articles and investor relation blogs were used to gather data. The following tables and charts represent an analysis of Workday which had an IPO on 12 th October, The charts exhibit financial information of both pre- and post- IPO data and provide some insight into the operational growth valued by public market investors. All data in this report is gathered from public sources.

3 The Path to IPO The holy grail for many start-up SaaS companies and their investors is an IPO. Yet, there are many different business models and strategies a SaaS company can pursue to scale the business and reach the maturity to go public. The requirements to go public have evolved with the market s experience with the SaaS business model and macroeconomic trends. Since SalesForce.com s IPO in 2004 at $100million in revenues, the SaaS market has grown with over 45 (at the time of this writing) pure SaaS B-2-B vendors entering the public markets since then. Investors expectations have evolved to expect that companies show rapid revenue growth, but also a path to profitability. The association of profitability with valuation is expected to increase during 2016, but in the preceding years covered by this report, revenue growth, customer acquisition and customer expansion have been the key drivers of SaaS valuations. HR software vendor Workday went public with its $637 million initial public offering, which valued the company at nearly $4.5 billion. Workday s market cap averaged 19 times revenues in the three years after IPO through January 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. Organizations headquartered around the globe, ranging from medium-sized businesses to the world's largest enterprises, use Workday to manage enterprise HR.

4 Pre and Post IPO Workday Operational Data Summary: Workday gambled early on, investing heavily upfront in R&D and Sales and Marketing ($8M in Sales & Marketing alone in 2007). The gamble paid off and from its founding in 2005, Workday s revenues grew dramatically, from $455,000 in 2007, to $274 million five years later. The company has also managed to shift the balance of revenues from the sale of professional services to the majority of revenue coming from recurring subscriptions at a much higher gross margin. In 2009, subscription revenue accounted for 54.45% of the total and professional service revenues accounted for 45.55%. By Jan 2016, subscription revenues accounted for 80% of total revenue, helping Workday present as a true SaaS company gross profit margin was -838% and operating expense was 4,616.70%. of revenue. The majority of the expense was divided between R&D and Sales & Marketing, 2500% and 1700 % of revenues respectively. General & Administrative expenses were 346% of total revenues. In 2008, Workday grew revenues by 1300% with a gross margin of % and operating expense investment of 727% of revenue. Operating losses dramatically improved in one year between 2007 and 2008 from 5500% to 800% of revenue. By 2015, losses were only 22% of revenue. Workday s on-going strong investment in R&D and Sales & Marketing has driven its revenue size and continuously increasing revenue per customer. Workday continues to invest heavily in R&D, often surpassing or roughly equal to its investment in Sales and Marketing, to support future growth. In addition, steady improvements in gross margin and regular reductions in operating losses have balanced reductions in annual revenue growth as revenue reached over $1billion.Annual revenue growth rate remains strong, though, by most measures at almost 50% at the end of January A little more than 10 years from founding and only eight years from achieving its first $million in revenues, Workday recorded almost $1.2 billion in recognized revenues and year-over-year improving gross margins, achieving almost 70% gross margin in FY In summary, as is seen in the following charts, Workday has managed to deliver steady improvement every year in key metrics like:

5 ! Gross margin,! Operating margin,! Cash from operations,! Revenue per customer, with only a very slight increase in the per customer cost of revenue,! Higher % of total revenue coming from subscription revenue, and! Employee productivity Even though Workdays market cap multiple has steadily decreased from a high of almost 33 times revenue in January 2014 to about 10 times revenue at the end of January 2016, Workday s market cap remains one of the highest multiples for a public SaaS company as of that date.

6 Revenue & Expenses as % of Revenues (as a percentage of total revenues) Pre IPO Post - IPO Revenues: IPO-5 IPO-4 IPO-3 IPO-2 IPO -1 IPO IPO+1 IPO+2 IPO+3 Subscription Services 54.45% 53.77% 65.93% 69.55% 75.53% 77.85% 79.94% Professional Services 45.55% 46.08% 34.07% 30.45% 24.47% 22.15% 20.06% Total Revenues ($ 000) $455 $6,398 $25,245 $68, , , , ,860 1,162,346 Annual Revenue Growth % % % 97.53% % 71.36% 68.01% 47.53% Cost of Revenues IPO-5 IPO-4 IPO-3 IPO-2 IPO -1 IPO IPO+1 IPO+2 IPO+3 Costs of Subscription Services 26.23% 16.78% 16.62% 14.34% 14.76% 13.01% 12.89% Costs of Professional Services % % 54.99% 41.80% 32.01% 28.24% 22.95% 20.60% 19.32% Total Cost of Revenues % % 81.22% 58.58% 48.63% 42.58% 37.70% 33.61% 32.21% Gross Margin % % 18.78% 41.42% 51.37% 57.42% 62.30% 66.39% 67.79% Research and Development % % % 57.56% 46.13% 37.52% 38.84% 40.22% 40.43% Sales and Marketing % % 82.69% 53.67% 52.34% 45.11% 42.09% 40.09% 37.34% General and Administrative % 64.86% 20.66% 12.57% 11.26% 17.86% 14.06% 13.46% 12.78% Total Operating Expenses 4,616.70% % % % % % 94.98% 93.77% 90.56% Operating Margin % % % % % % % % %

7 Recognized Revenue & Annual Revenue Growth (in thousands, except the % change annually)! Companies Workday* IPO-5 IPO-4 IPO-3 IPO-2 IPO -1 IPO IPO+1 IPO+2 IPO+3 Subscription Services $13,746 $36,594 $88,634 $190,320 $354,169 $613,328 $929,234 Professional Services $11,499 $31,361 $45,793 $83,337 $114,769 $174,532 $233,112 Total Revenues Workday $455 $6,398 $25,245 $68,055 $134,427 $273,657 $468,938 $787,860 $1,162,346 %change annually % % % 97.53% % 71.36% 68.01% 47.53%

8 Annual Revenue Growth & Gross Profit Margin 350% 300% 250% IPO 200% 150% 100% 50% 0% Annual Revenue Growth Gross Profit Margin

9 Workday Inc. Annual % Change in Revenue and Cost Pre - IPO Post IPO Revenues: IPO-4 IPO-3 IPO-2 IPO -1 IPO IPO+1 IPO+2 IPO+3 Subscription % % % 86.09% 73.17% 51.51% Professional Services % 46.02% 81.99% 37.72% 52.07% 33.56% Total Revenues % % % 97.53% % 71.36% 68.01% 47.53% Costs and expenses: Costs of Subscription Services 72.41% 95.66% 75.68% 76.29% 48.10% 46.25% Costs of Professional Services % 51.26% 79.62% 39.25% 50.84% 38.34% Total Cost of Revenues % 81.32% 94.41% 63.98% 78.28% 51.72% 49.77% 41.40% Research and Development % 16.35% 30.39% 58.30% 65.55% 77.39% 73.99% 48.31% Sales and Marketing % 25.99% 74.97% 92.63% 75.45% 59.89% 60.02% 37.43% General and Administrative % 25.66% 64.01% 76.93% % 34.86% 60.88% 40.10% Total Operating Expenses % 20.61% 50.09% 75.07% 86.43% 61.98% 65.86% 42.48% Operating Margin % -0.11% 9.08% 39.93% 50.25% 30.05% 40.72% 22.70%

10 $500,000 Workday Inc. Operating Expenses $450,000 $400,000 Amount ($ '000) $350,000 $300,000 $250,000 $200,000 IPO $150,000 $100,000 $50,000 $0 30 Dec, Product development $11,380 $25,823 $30,045 $39,175 $62,014 $102,665 $182,116 $316,868 $469,944 Sales and marketing $8,049 $16,569 $20,875 $36,524 $70,356 $123,440 $197,373 $315,840 $434,056 General and administrative $1,577 $4,150 $5,215 $8,553 $15,133 $48,880 $65,921 $106,051 $148,578

11 Workday Inc. Operating Expenses as a % of Revenue 140% 120% 100% % of Revenue 80% 60% 40% IPO 20% 0% Product development % 57.56% 46.13% 37.52% 38.84% 40.22% 40.43% Sales and marketing 82.69% 53.67% 52.34% 45.11% 42.09% 40.09% 37.34% General and administrative 20.66% 12.57% 11.26% 17.86% 14.06% 13.46% 12.78%

12 Workday Inc. Operating Expenses % Change Annually 250% IPO Annual % change in revenues 200% 150% 100% 50% 0% Product development % 16.35% 30.39% 58.30% 65.55% 77.39% 73.99% 48.31% Sales and marketing % 25.99% 74.97% 92.63% 75.45% 59.89% 60.02% 37.43% General and administrative % 25.66% 64.01% 76.93% % 34.86% 60.88% 40.10%

13 Workday Inc. Cash from Operations $300,000 $250,000 Amount ($ '000) $200,000 $150,000 $100,000 IPO $50,000 $0 ($50,000) Cash from operations ($30,128) ($15,335) ($13,774) $11,214 $46,263 $102,003 $258,637

14 The following estimates were developed from Workday s S-1 filings using revenue, cost and operating expense totals and dividing by the number of customers in a given year. Workday Inc. Revenue, Cost and Operating Expense Per Customer (Amount $ 000) Estimated average revenue, costs and expenses per customer Pre - IPO Post IPO Revenues: IPO -1 IPO IPO+1 IPO+2 IPO+3 Subscription per customer annually $ $ $ $ $ Professional Services $ $ $ $ $ Total Revenues $ $ $ $ $ Costs and expenses: Costs of Subscription Services $69.00 $98.00 $ $ $ Costs of Professional Services $ $ $ $ $ Total Cost of Revenues $ $ $ $ $ Gross Profit $ $ $ $ $ Research and Development $ $ $ $ $ Sales and Marketing $ $ $ $ $ General and Administrative $47.00 $ $ $ $ Total Operating Expenses $ $ $ $ $ No. of Customers !

15 $ Workday Inc. Cost of Revenues Per Customer $ IPO Amount ($ '000) $ $ $ $ $ $ Total Cost of Revenues $ $ $ $ $ Costs of Professional Services $ $ $ $ $ Costs of Subscription Services $69.00 $98.00 $ $ $125.00!

16 Growth in Employee Number

17 $ Growth in Employee Productivity $ $ $ $ $ $ $ $ $ $

18 Market Cap/Valuation Data Post IPO: Market Cap (diluted, priced as of the period end date) & Market-Cap Multiple (in thousands) Average Workday* Market-Cap $3,953,668 $15,337,933 $14,596,961 $11,972,908 $11,465,368 M-Cap Multiple Rule of 40% The Rule of 40% is defined as Annual Revenue Growth Rate + Operating Margin equal to 40% or more. This metric for SAAS companies attempts to define a reasonable relationship between investing in growth and generating profits. Investors in private companies often use this calculation as a key metric when making investment decisions. Workday s results in terms of the Rule of 40 were over 40% combined revenue growth and operating margin every year until this most recent reporting of annual results in January The market has not reacted as negatively as might have been expected as Workday s revenue growth rate is still impressive and the reduction of operating margin can be attributed to productive investments in R&D and Sales and Marketing, which in the past have produced results.

19 Rule of 40% 120% 100% Rule of 40 (%) 80% 60% 40% 20% 0% Workday % 95.01% 46.11% 66.98% 46.07% 48.15% 32.15%