Workday Inc. (NASDAQ:WDAY) announced strong fiscal second-quarter 2019 results on Tuesday after the market closed, detailing early progress in a recent large acquisition, as well as the sustained adoption of its industry-leading finance and HR platforms by the world's largest businesses. Workday also increased its full-year outlook.

With the stock down modestly in after-hours trading as of this writing -- albeit after a more than 50% rise over the past year -- let's clock in to see exactly what Workday achieved in its latest quarter, and what investors can expect looking ahead.

Workday logo on simple clouds with a blue background

IMAGE SOURCE: WORKDAY.

Workday results: The raw numbers

Metric

Fiscal Q2 2019*

Fiscal Q2 2018

Year-Over-Year Growth

Revenue

$671.7 million

$525.3 million

27.9%

GAAP net income (loss)

($86.2 million)

($82.5 million)

N/A

GAAP earnings (loss) per share

($0.40)

($0.40)

N/A

DATA SOURCE: WORKDAY. *FOR THE QUARTER ENDED JULY 31, 2018. 

What happened with Workday this quarter?

  • Revenue was above the high end of Workday's guidance provided in June, which called for a range of $661 million to $663 million. 
  • Within that, subscription revenue increased 30.2% year over year to $565.7 million, and professional services revenue grew 16.8% to $106.1 million.
  • Adjusted for items like stock-based compensation, Workday's (non-GAAP) net income was $72.4 million, or $0.31 per share, up 29.2% from $0.24 per share in the same year-ago period.
  • Generated cash flow from operations of $57.6 million, and free cash flow of $4.3 million.
  • Subsequent to the end of the quarter, on August 1, 2018, Workday closed on its $1.55 billion acquisition of Business Planning Cloud platform leader Adaptive Insights.
  • Workday also acquired Stories.bi and Rallyteam, two machine-learning specialists that should allow customers to "better understand and react to business needs."
  • As of today, more than 35% of the Fortune 500 and 50% of the Fortune 50 have selected Workday's Human Capital Management platform for their core HR operations. Notable new customers this quarter include Eli Lilly, Bridgestone North America, and DBS Bank, and notable go-lives this quarter included Humana, Michelin, Samsung, and Target.

What management had to say

Workday co-founder and CEO Aneel Bhusri stated:

Q2 was another strong quarter. We once again increased the number of both finance and HR customers in the Fortune 500 and made significant progress on our acquisition of Adaptive Insights to further enable customers to plan, execute, and analyze all in one system. With our focused product strategy, continued investment in opening our platform, and relentless commitment to customer success, we continue to add levers that drive enduring growth and our long-term position as the trusted partner for finance, HR, and business transformation.

Looking forward

For the third quarter of fiscal 2019, Workday expects revenue in the range of $721 million to $723 million, comprised of subscription revenue of between $609 million and $611 million (including $18 million from Adaptive Insights), and services revenue of $112 million (including $4 million from Adaptive Insights).

As such, Workday now expects full fiscal-year 2019 revenue of $2.765 billion to $3.119 billion (up from $2.68 billion to $2.695 billion previously), assuming subscription revenue of $2.341 billion to $2.348 billion (up from $2.275 billion to $2.290 billion before). Note that these revised full-year ranges include a total of $51 million in revenue from Adaptive Insights for the remainder of the year -- $42 million from subscription revenue and $9 million from professional services -- as well as a modest headwind to overall subscription revenue growth given today's currency exchange rates. In addition, Workday notes that it continues to expect organic short-term unearned revenue growth in the low-20% range for the third and fourth quarters.

All things considered, Workday effectively extended its habit of under-promising and over-delivering, and its latest acquisitions should serve to solidify its industry leadership. And I think long-term investors should be pleased with where it stands today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Workday. The Motley Fool has a disclosure policy.