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How is Workday’s PaaS Strategy Coming Along?

Posted on Thursday, Mar 7th 2019

According to a Market Research Future report published last year, the global Human Capital Management (HCM) market is estimated to grow 9% annually to reach $24 billion by 2023. Workday (NYSE: WDAY) may have started out as a HCM provider, but the company has diversified into enterprise services since and its growth continues to surpass market expectations.

Workday’s Financials

For the fourth quarter, Workday saw revenues grow 35% over the year to $788.6 million, ahead of the Street’s forecast of $777 million. Total costs and expenses grew 37% to $908.9 million, widening the net loss to $104.4 million. On an adjusted basis, though, EPS of $0.41 came in ahead of the Street’s forecast of $0.32 and a stellar improvement over previous year’s $0.28.

By segment, Subscription services revenues grew 38% to $673.5 million, ahead of the management’s guidance of $663-$665 million. Professional services revenues grew 24% over the year to $115.1 million and exceeded the guidance of $112 million. Workday is seeing strong adoption of its financial management offering. During the quarter, the company saw 79 new deals for its financial offering, including four wins from Fortune 500 companies. Some of these new customers include names like Allina Health, Banner Heath, and Ryder Truck.

Workday ended the year with revenues growing 32% to $2.82 billion driven by a 33% growth in subscription revenues that grew to $2.39 billion. Operating loss grew to $463.3 million compared with $303.2 million reported a year ago. On an adjusted basis, net income per diluted share came in at $1.36 compared with $1.03 reported a year ago.

For the current quarter, Workday expects to earn subscription revenues of $692-$694 million and professional services revenues of $120 million. That translates to a total revenue forecast of $812-$814 million, ahead of the Street’s forecast of $806.2 million. Workday expects to end the current year with subscription services revenues of $3.03-$3.045 billion and professional services revenues of $500 million, or total revenues of $3.53-$3.55 billion. The market was looking for revenues of $3.52 billion for the year.

Workday’s Platform Strategy

Last year, Workday opened up its Cloud Platform to developers and entered the PaaS market. By giving developers access to to its platform, organizations could now leverage Workday’s data models and use custom apps and extensions from Workday. Apps built on the platform allow data to be retained with the customer while ensuring that they get access to Workday’s security, machine learning algorithms, and statistical models.

To help developers continue to build extended apps, the company recently launched the App Creator and a marketplace. The App Creator simplifies the process of building apps and brings a drag-down environment to non-developers. The service will be available to users early this year. The marketplace has been designed to simplify the process of finding and accessing solutions built by the Workday ecosystem including customers, partners, and independent developers.

Some of the use cases of the platform offering included a business intelligence company that developed a talent mobility app that allows employees to visualize available openings across the organization to chart their career growth; a global airline company that used the platform to build an ID badging service that simplified the process of checks and paperwork; and a financial management company created an isolated peer-to-peer feedback system for its agile development teams. What other services do you think can be built on Workday?

Its stock is trading at $182.43 with a market capitalization of $40 billion. It had touched a 52-week high of $200 earlier last month. It has recovered from the 52-week low of $117.24 that it had fallen to in June last year.

Photo Credit: Steven Miller/Flickr.com

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