Please ensure Javascript is enabled for purposes of website accessibility

Workday Management Explains Its Key Growth Drivers

By Daniel Sparks – Nov 30, 2018 at 4:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here are three must-see quotes from Workday's third-quarter earnings call.

Enterprise cloud applications company Workday (WDAY -2.58%) impressed investors this week with accelerating revenue growth and a better-than-expected adjusted profit per share. In addition, management was optimistic about the rest of the year, raising its full-year fiscal 2019 outlook for subscription revenue. Shares surged about 13% on Friday as investors digested the news.

While the company's quarterly earnings release provides some useful information, investors will have to turn to Workday's third-quarter earnings call to get more detailed insight into how the company's specific product categories are performing.

Workday San Francisco office lobby

Image source: Workday.

Below are three key quotes from the call, including a look at the company's strong performance in financial management products, Prism Analytics, and more.

Accelerating growth in financial management products

In Workday's third-quarter earnings release, management said its financial management suite of applications continues to perform very well, seeing "accelerated adoption" by Workday customers. In the earnings call, management went into further detail. "Subscription revenue once again grew over 50% with net new [annualized customer value] for core financials growing over 60%," said Workday CEO Aneel Bhusri.

This is a significant catalyst for Workday, considering the company's consolidated subscription revenue is growing at a much slower rate of 35% year over year.

Prism Analytics is growing by triple digits

Workday's business intelligence offering, Prism Analytics, is seeing rapid growth in customer adoption. Indeed, the growth is so fast that management has decided to moderate its efforts to sell the product.

Bhusri explained:

So I would say on Prism we're less and less throttling our willingness to sell. It's much more about making sure that the used cases fit where we are with the products, but the product line is one of the fastest growing product lines from a net new [annualized customer value] perspective we've ever seen ... Triple-digit year-over-year growth, and as we begin to mature the capabilities and grow the used cases, we honestly expect that to continue...

Management breaks down its growth drivers

Since management doesn't break out its revenue by product type in its quarterly financial updates, some investors may wonder how the company thinks about its growth drivers. Fortunately, Bhusri provided some context during the call on how the company ranks its products as contributors to its growth:

Both [human capital management] and financial management will continue to be the primary drivers of growth in near-term with a strong foundation for future growth drivers in Workday Prism Analytics, Adaptive Insights, business planning cloud and the Workday cloud platform.

Later during the call, Workday co-president Chano Fernandez provided even more context, noting that the company's financial management applications suite is growing as a percentage of its product mix, but at a slow rate because of "the sustained solid growth in [human capital management]..."

It was clear from Workday's earnings release that the company is benefiting from strong momentum, and management commentary from the conference call reinforced this narrative.

Daniel Sparks 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Workday, Inc. Stock Quote
Workday, Inc.
$152.22 (-2.58%) $-4.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.