Workday Inc. (WDAY +2.49%) released solid fiscal fourth-quarter 2017 results Monday after the market closed, punctuated by accelerated subscription revenue growth and record overall sales. Workday also offered an upbeat outlook for both the current quarter and new fiscal year.
Let's take a closer look, then, at what the human capital management and analytics applications company accomplished as fiscal 2017 came to a close.
Image source: Workday, Inc.
Workday results: The raw numbers
| Metric |
Fiscal Q4 2017 |
Fiscal Q4 2016 |
Growth (YOY) |
|---|---|---|---|
|
Revenue |
$436.7 million |
$323.4 million |
35% |
|
GAAP net income (loss) |
($105.6 million) |
($81.1 million) |
N/A |
|
GAAP earnings (loss) per share |
($0.52) |
($0.42) |
N/A |
Data source: Workday, Inc.
What happened with Workday this quarter?
- Subscription revenue grew 39.5% year over year, to $365.2 million.
- Professional services revenue increased 16.1%, to $71.5 million.
- By comparison, the guidance Workday provided last quarter called for lower revenue between $427 million and $430 million, or growth of 32% to 33%. That range assumed more modest 9% growth in professional services revenue, to $67 million, and 38% to 39% growth in subscription revenue, to a range of $360 million to $363 million.
- For the full fiscal year of 2017, the company generated operating cash flow of $348.7 million, and free cash flow of $227.8 million.
- The year ended with cash, cash equivalents, and marketable securities of $2.00 billion.
- Amazon.com's Web Services (AWS) was chosen as Workday's preferred public cloud infrastructure provider for customer production workloads. Workday will offer customers the option to run its full suite of applications in the public cloud through AWS.
- The company closed 13 Fortune 500 accounts in the human capital management space during the quarter, including BP, Deutsche Bank, Dow Chemical, and Wal-Mart. The disclosure of the Wal-Mart win -- which marked Workday's biggest-ever deal -- caused Workday stock to pop nearly 10% in a single day last month.
What management had to say
Workday co-founder and CEO Aneel Bhusri elaborated:
In Q4, we delivered the best quarter in company history to close out a very successful fiscal 2017. Our strong performance was driven by a combination of our industry-leading products and technology, continued high levels of customer satisfaction, and our dedicated Workday team. We believe these are the right areas of focus to achieve another great year for Workday in the year ahead.
Looking forward
During the (current) fiscal first quarter of 2018, Workday expects revenue of $467 million to $468 million, representing 34% to 35% year-over-year growth. For perspective -- and though we don't usually pay close attention to Wall Street's demands -- analysts, on average, were modeling lower fiscal first-quarter 2018 revenue of $449.2 million.
Finally, note that Workday has formally adopted ASC 606 accounting standards, which divorces timing of invoicing from revenue recognition. As such, Workday is transitioning from providing detailed annual billings guidance to annual operating cash flow guidance, which serves as a more effective gauge of performance as the company grows and improves profitability.
With that in mind, Workday anticipates full-fiscal year revenue of $2.005 billion to $2.025 billion (up 27% to 29% year over year) -- well above the $1.99 billion investors were expecting -- including subscription revenue of $1.68 billion to $1.70 billion (up 30% to 32%), and 15% growth in professional services revenue, to $325 million. Annual operating cash flow for the full fiscal year 2018 should increase 20% year over year, to $420 million.
All things considered, there's nothing not to like about this strong quarter as Workday continues to consciously forsake profitability in favor of scaling its business. As Workday's solutions increasingly become an integral part of how the world's largest businesses operate, I think investors should be more than happy with the company's direction today.
