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Workday Looks Unstoppable

Posted on Thursday, Jan 3rd 2019

It may have been a roller-coaster end to the previous year for the stock market, but SaaS-based HCM services provider, Workday (NYSE: WDAY) seems unfazed. The company recently reported stellar third quarter results that sent its stock soaring. Despite a turbulent end to December, Workday entered the new year after gaining more than 50% in value over the previous year.

Workday’s Financials

For the third quarter, revenues grew 34% over the year to $743.2 million, ahead of the Street’s forecast of $723.1 million. It ended the quarter with a net loss of $153.3 million, compared to a net loss of $86 million a year ago. Non-GAAP net income per share came in at $0.31, compared to $0.24 reported a year ago. The market was looking for an EPS of $0.15 per share.

By segment, Subscription services revenue rose 34.7% to $624.4 million in quarter and professional services revenue rose 29.4% to $118.8 million.

During the quarter, Workday added names like Bank of Montreal, Glencore International, and Piedmont Airlines as its new HCM customers.

For the current quarter, Workday expects to earn revenues of $775-$777 million, ahead of the Street’s forecast of $757.3 million. For the 2019 fiscal year, it forecast revenues of $2.808-$2.810 billion.

Workday expects its fiscal 2020 subscription services revenue to come in at $3-$3.01 billion, ahead of the analysts’ expectations of $2.97 billion.

Workday’s Product Expansion

During the quarter, Workday continued to expand its product offerings, focusing on integrating AI and machine learning capabilities within its offerings. As part of this effort, it recently released Workday People Analytics, a new application that leverages augmented analytics powered by artificial intelligence to provide customers with key metrics. The solution will give executives, organization leaders and HR business partners a view into the most critical trends in their workforce and an understanding of the most likely drivers of those trends. It will be accompanied by explanatory narratives called stories that will highlight the most critical activities in their business.

Earlier last year, Workday had announced the $1.6 billion acquisition of Adaptive Insights. During the recently released quarter results, Workday went live on Adaptive Insights Business Planning Cloud to help it make bigger inroads into the enterprise-level software solutions market. Additionally, it also announced an extension of the Business Planning Cloud with a strategic workforce planning solution to the Adaptive Insights solution. The feature will help organizations develop comprehensive workforce plans that will integrate with the organization’s larger plan.

It also announced the release of Workday 31, which includes several new features such as the skills cloud. The skills cloud is a kind of a universal skills language that helps organizations cleanse, understand, and relate job skills data so that they can tap into talent both within and and outside of their organizations.

Workday is clearly doing things the right way as is evident from the rising stock price and revenue growth. It was recently ranked the leader in the Fortune Future 50 companies and was ranked third by Fortune in the Best Places to Work for Women and seventh among the best places to work overall this year. The one missing link so far is profits. But given the product and its growing adoption, that should not be too far away.

I would like to know from users of Workday about the product features that they find missing in Workday even now. What more can Workday offer to make sure you don’t look at other cloud-based software providers for your needs?

Its stock is trading at $159.68 with a market capitalization of $34.81 billion. It had touched a 52-week high of $172.67 in November last year. It has recovered from the 52-week low of $100.24 that it was trading at nearly a year ago.

Photo Credit: Steven Miller/Flickr.com

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