According to a Grand View Research report published earlier this year, the global human resource management market is projected to grow 10.4% annually to $30 billion by 2025. The growth is expected to be driven by the need to replace legacy systems with improved human capital management platforms. Recently, SaaS-based HCM services provider, Workday (NYSE: WDAY) announced its quarterly results that continued to outpace market expectations.
For the second quarter, revenues grew 28% over the year to $671.7 million, ahead of the Street’s forecast of $663.1 million. EPS of $0.31 was also ahead of the market’s forecast of $0.26 for the quarter. Previous coverage is available here.
By segment, subscription revenues grew 30% to $565.7 million and professional services revenues grew 17% to $106 million. The market was looking for subscription revenues of $559 million for the quarter.
For the current quarter, Workday expects to earn revenues of $721-$723 million, ahead of the Street’s forecast of $691.2 million. For the full 2019 fiscal year, Workday expects revenues of $2.765-$2.772 billion, ahead of the $2.704 billion consensus.
The biggest news for Workday during the quarter was its $1.6 billion acquisition of Adaptive Insights. Over the past few years, Workday has been diversifying beyond human capital management solutions to other cloud-based enterprise offerings. The acquisition of Adaptive Insights is a big step toward that goal. Adaptive Insights is a leading cloud-based provider of financial planning services. In May this year, Adaptive Insights had filed to go public and had disclosed revenues of $106.5 million in fiscal 2018 with a loss of $42.7 million. Workday plans to integrate the Adaptive Insights Business Planning Cloud with its suite of applications for finance and HR to deliver a solution that will help organizations plan, execute, and analyze performance better.
This is not the only acquisition that Workday made this year. In June this year, it had also announced the acquisition of Rallyteam’s talent. San Francisco-based Rallyteam’s service helps companies keep talented employees by matching their skills with challenging opportunities in-house. Workday plans to leverage Rallyteam’s capabilities to enhance its machine learning offerings. Terms of the acquisition were not disclosed.
Additionally, in January, Workday had also acquired SkipFlag, an enterprise knowledge management service provider. SkipFlag was founded by LinkedIn alumni and is known to enable the integration of various data feeds with machine learning capabilities to build a knowledge map across the organization. Workday plans to use SkipFlag’s deep learning capabilities across its offering to improve the products available to its customers. Terms of the acquisition were not disclosed.
Workday is clearly building up its arsenal to ensure that it can offer all the right tools that are needed for enterprise resource management. I would like to know how willing are you, as users, to exchange your existing, and in some cases, legacy solutions for Workday’s offerings? What is it that Workday needs to add more to get you to switch?
Its stock is trading at $142.21 with a market capitalization of $30.6 billion. It had touched a 52-week high of $157.12 last month. It has recovered from the 52-week low of $95.35 it had fallen to in December last year.
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