Image source: Workday Inc.

Workday Inc. (NYSE:WDAY) is set to release fiscal first-quarter 2017 results Tuesday, May 31, 2016 after the market close. With shares of the HR and finance enterprise-application specialist down around 5% so far this year -- and despite climbing more than 27% in March following its strong fiscal Q4 2016 report -- you can bet the HR and finance enterprise-application specialist would love to continue that momentum with another strong showing. 

But what, exactly, should investors be watching when Workday's latest results hit the wires?

First, note that Workday's most-recent guidance calls for first-quarter revenue in the range of $337 million to $339 million, representing year-over-year growth of 34% to 35%. Within that total, Workday anticipates recurring subscription revenue to comprise $277 million to $278 million, good for roughly 38% growth from last year's fiscal Q1. Meanwhile, total derived billings -- that is, the sum of revenue and the sequential change in unearned revenue -- should be between $360 million and $365 million, or growth of 33% to 34%.

Digging deeper into the drivers of that growth, listen for comments from management on whether the company has enjoyed its typically high competitive win rates, and whether demand remains strong for its financial management and human capital management (HCM) products, both of which are crucial to developing and driving sustained growth. The highly regarded HCM products, in particular, enjoy strong renewal rates, and tend to act as a gateway product through which Workday can upsell its customers to additional complementary products. This, in turn, makes Workday and its software offerings increasingly indispensable to the clients it serves.

Looking further out, Workday also told investors last quarter that it expects subscription revenue to grow sequentially in the fiscal second, third, and fourth quarters of the year by just under 10%. At the same time, Workday stressed its strategy of prioritizing top-line growth over margins, while simultaneously maintaining its longer-term goal of achieving operating margin of at least 20%.

Next, Workday doesn't typically provide specific bottom-line guidance, primarily given its conscious decision to forsake profitability in favor of driving revenue and market share higher in these early stages. But for perspective -- and while we typically don't pay much attention to Wall Street's near-term demands -- analysts' consensus estimates predict Workday will incur an adjusted net loss of $0.02 per share on revenue of $338.7 million -- the latter of which is near the high-end of its guidance range.

We should also watch for Workday to continue generating healthy levels of operating and free cash flow. Last fiscal year, for example, operating cash flow skyrocketed 150% year over year, to $259 million, while free cash flow grew to $125 million last fiscal year, or just over 10% of total revenue, from roughly breakeven in fiscal 2015. In addition, with the caveat from CFO Mike Peek that Workday's cash flow is "inherently difficult to forecast due to changes in working capital," and excluding investments in new buildings, the company expects growth in both operating cash flow and free cash flow to be roughly inline with growth in billings this fiscal year. 

Depending on the extent of any variances in Workday's first-quarter performance, investors should also keep an eye on any revisions to the company's full-year guidance. As it stands, Workday's outlook calls for full-year derived billings to be $1.855 billion to $1.875 billion, good for 30% to 31% growth, with roughly 42% of that total expected in the first half of the year.

Meanwhile, Workday should secure subscription revenue for the year of $1.25 billion to $1.285 billion, or growth of 37% to 38%. And total revenue is expected to be in the range of $1.54 billion to $1.55 billion, or growth of 33% over fiscal 2016. 

This quarter's results are only a snapshot of the early days of Workday's long-term growth story. But it's a valuable picture that will give investors plenty to chew on as they decide whether the stock is worthy of a place in their long-term portfolios. If Workday delivers on its promises as it strives to secure as large a piece of its growing market as possible, next week's report should make that decision much easier.