Powered by strong growth in subscription revenue and momentum with financial customers, Workday (NASDAQ:WDAY), a human capital management software company, reported a strong fourth quarter last week.
The results were solid all around. "We were pleased to close Q4 with strong momentum across our key subscription revenue drivers, while delivering solid operating margins and record cash flows," CFO Robynne Sisco said in the company's fourth-quarter earnings release.
While headline figures from the release are notable -- particularly its 35.4% year-over-year rise in revenue and its 46% jump in non-GAAP earnings per share -- there was more information worth investors' attention in the company's quarterly earnings call. Here are three quotes from the call.
1. Workday's financial offering is winning customers
One common theme in Workday's recent earnings calls has been the success of the company's applications for financial companies. This continued in Q4, with the company adding 79 core financial management customers, four of which were Fortune 500 companies.
But Workday CEO Aneel Bhusri went further during the earnings call, highlighting how the company's financial management product is morphing into a key tool for customer acquisition: "One interesting new trend is that we are beginning to see large enterprise companies now starting their finance and HR journeys with Workday Financial Management. This is a new development, and something we view as a positive indication of the growing awareness of our Financial Management applications and the high levels of satisfaction our finance customers have experienced in the past several years."
2. The company is investing heavily
When asked about how management thinks its operating margin will develop over time, Sisco said the company still has a long-term target of a non-GAAP operating margin of 25%. But she also noted that the company continues to invest aggressively: "[W]e are still heavily investing, not only in Financials but in some of our other products such as Adaptive and bringing them into the Workday fold, Prism Analytics, Workday Cloud Platform, and building out a lot of our industry modules as well, such as inventory for healthcare and supply chain. So we're very much in investment mode..."
Sisco pointed to Workday's mature human capital management business, which already has a 25% non-GAAP operating margin, as evidence of where management believes it can take its consolidated business over the long haul. "[B]ut the proof of the HR business right now really gives us a lot of confidence that as we move toward those long-term targets," she said, "they are very achievable in the long run."
3. Broad-based growth drivers
Workday's momentum is supported by a broad base of growth drivers. The company's 30% year-over-year increase in revenue backlog during the quarter, for instance, was "driven by strong net new bookings, success with add-on sales into our customer base, and strong renewals, with net retention once again over 100%," Sisco said. In addition, she noted that the company continued to view its ongoing global expansion as a key growth lever, "with total revenue outside the U.S. up 41% to $184 million in Q4, representing 23% of total revenue."