Workday (WDAY +4.25%) announced impressive fiscal first-quarter 2020 results on Tuesday after the market closed, detailing the sustained traction of its human-capital-management and financial-software solutions in winning over the world's biggest enterprise clients. In what may feel like an old-hat move for investors who've watched Workday shares soar in recent quarters, the company followed by boosting its full-year outlook for subscription-revenue growth.
With shares down modestly in after-hours trading as of this writing as the market absorbs the news, let's examine how Workday started its new fiscal year.
IMAGE SOURCE: WORKDAY.
Workday results: The raw numbers
| Metric |
Fiscal Q1 2020* |
Fiscal Q1 2019 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$825.1 million |
$618.6 million |
33.4% |
|
GAAP net income (loss) |
($116.3 million) |
($74.4 million) |
N/A |
|
GAAP earnings (loss) per share |
($0.52) |
($0.35) |
N/A |
DATA SOURCE: WORKDAY. *FOR THE QUARTER ENDED APRIL 30, 2019. GAAP = GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
What happened with Workday this quarter?
- By comparison, Workday's guidance (provided in early March) called for lower revenue of between $812 million and $814 million.
- Subscription revenue climbed 34.3%, to $701 million -- above guidance for 33% growth -- while professional-services revenue increased 28.5%, to $124 million.
- On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Workday generated net income of just under $105 million, or $0.43 per share, up from $0.33 per share a year ago.
- Workday generated cash flow from operations of $209.2 million.
- Recent new Workday Human Capital Management (HCM) customers include Carl Zeiss AG, Cisco Systems, Daimler Trucks N.A., and Procter & Gamble.
- Recent new and expanded Workday Financial Management customers include Aurora Health, E*Trade Financial, Legg Mason, and a large Fortune 500-scale insurance company that added the finance product to become a full Workday platform customer.
What management had to say
Workday co-founder and CEO Aneel Bhusri stated:
Coming off the heels of an excellent fiscal year 2019, our momentum continued with a strong first quarter. We added many new customers across the globe -- increasing our footprint across the Fortune 50 and 500 -- and saw more existing customers expand their investment in Workday. Looking ahead, we believe our ability to enable more organizations to plan, execute, and analyze in one system powered by machine learning, coupled with our commitment to employee and customer success, will further solidify our foundation for enduring growth.
Looking forward
During the subsequent conference call, management told investors to expect fiscal second-quarter 2020 revenue of roughly $870 million to $872 million, including a roughly 32% increase in subscription revenue to a range of $746 million to $748 million and services revenue of $124 million.
As such, Workday once again increased its full-year guidance, calling for fiscal 2020 revenue of $3.545 billion to $3.56 billion, up from $3.53 billion to $3.545 billion previously. This new range assumes a slightly raised subscription-revenue range of $3.045 billion to $3.06 billion (up 28% year over year), and continues to model $500 million in professional-services revenue.
It remains to be seen how the market will react to this modestly stronger-than-expected showing, particularly with Workday shares already up more than 60% over the past year. But there's little not to like about Workday's latest beat-and-raise performance. As the company's industry-leading portfolio of products grow ever more pervasive in the enterprise world, patient investors should be more than happy with where it stands today.
