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Carnival in the Cloud: Workday Delivers a Surprise Profit

Posted on Friday, Sep 4th 2015

According to Allied Market Research, the Global ERP Software Market is expected to grow 7% annually over the period 2014 through 2020 to be worth $41.69 billion. SaaS-based enterprise services provider Workday (NYSE: WDAY) has been doing well in this market. In fact, in the recent quarter, the company managed to sneak in a profit. It is hard to predict if they will manage to retain this profitability, but for now, things appear to be looking up.

Workday’s Financials

Workday’s second quarter revenues grew 51% over the year to $282.7 million, ahead of the Street’s forecast of $274 million. They ended the quarter with an EPS of $0.02 compared with the market’s projections of a loss of $0.06 per share.

Subscription revenues grew 56% over the year to $223.7 million and professional services revenues grew 37% to $58.95 million. During the quarter, Workday crossed the milestone of over a 1,000 customers globally as they continued to add big names like Pfizer, Cleveland Clinic, and Texas A&M to their portfolio.

For the current quarter, Workday forecast revenues of $300 million-$303 million, in line with the market’s forecast of $302 million. Workday expects to end the year with revenues of $1.15-$1.158 billion compared with the Street’s projections of $1.14 billion.

Workday’s New Offerings

Of late, Workday has been focusing on releasing a financial planning solution for their customers. They announced further updates on Workday Planning, a new planning, budgeting, and forecasting application. The financial planning application will be integrated with Workday Financial Management and Workday Human Capital Management suites to become the first system to integrate finance and HR data with analytics and enterprise planning. The application will be available to customers during calendar year 2016 and will allow customers to generate budgets by combining historical actuals with modeling assumptions, collaborate on planning within planning teams to accelerate the budget and forecasting process, and better manage the budgetary cycle of execution, tracking, control, and analysis.

Besides financial planning, Workday is also expanding their cloud services offerings into inventory and procurement management, focused on the needs of healthcare providers. Both Workday Inventory and Workday Procurement will be available to the customers next year as well. These applications will help healthcare providers manage supplier and group purchasing contracts, track inventory, automate replenishment, drive cost savings through increased compliance with purchasing processes and a centralized dashboard for quicker decision making. Providers will also be able to get a comprehensive view of talent and evaluate the supply chain teams with reference to business goals.

Their stock is trading at $70.93 with a market capitalization of $13.5 billion. It touched a 52-week high of $97.40 in October last year.

You can read about many other entrepreneurs who have built successful cloud businesses in my book Carnival In The Cloud and here on my blog.

 

This segment is a part in the series : Carnival in the Cloud

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