Workday (WDAY +2.71%) released better-than-expected fiscal second-quarter 2020 results on Thursday after the market closed. As the first half came to a close, the human capital management (HCM) and financial software leader continued to add more of the world's largest enterprise and government customers to its base, leaving management comfortable increasing their full-year outlook, yet again.
Shares of Workday are up modestly in after-hours trading right now, building on a nearly 20% gain so far in 2019. So let's have a closer look at what the company accomplished over the past few months, as well as what investors should be watching in the coming quarters.
IMAGE SOURCE: WORKDAY.
Workday results: The raw numbers
| Metric |
Fiscal Q2 2020* |
Fiscal Q2 2019 |
Growth |
|---|---|---|---|
|
Revenue |
$887.8 million |
$671.7 million |
32.2% |
|
GAAP net income (loss) |
($120.7 million) |
($86.2 million) |
N/A |
|
GAAP earnings (loss) per share |
($0.53) |
($0.40) |
N/A |
DATA SOURCE: WORKDAY. *FOR THE QUARTER ENDED July 31, 2019. GAAP = GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
What happened with Workday this quarter?
- Revenue was above Workday's guidance provided in May, which called for a range of $870 million to $872 million.
- Within that total, subscription revenue grew 33.9%, to $757.2 million -- also above guidance for a 32% increase -- and professional-services revenue climbed 23.1%, to $130.6 million.
- After adjusting for items like stock-based compensation, Workday generated (non-GAAP) earnings of $109.3 million, or $0.44 per share, up from $0.31 per share in the same year-ago period.
- Workday generated operating cash flow of $100.3 million, up 74% year over year.
- More than 40% of the Fortune 500, roughly half the Fortune 100, and 17% of the Global 2000 now uses Workday for their core Human Capital Management system of record.
- Recent new Workday Human Capital Management customers include Gap, Stanley Black and Decker, and Rockwell Automation.
- Workday Financial Management revenue grew 50%, and recent new Workday Financial Management customers include a fortune 100 insurance company, Veolia UK, the City of Baltimore, and the government of Singapore.
What management had to say
Workday co-founder and CEO Aneel Bhusri stated:
It was a strong quarter, with continued global customer momentum across the Fortune 500 and Global 2,000, as more organizations look to Workday for the ability to plan, execute, and analyze in one system powered by machine learning. In addition, we celebrated one year with Adaptive Insights and continue to make great progress on our integration vision. As we move into the second half of the year, we are continuing to invest in areas that leverage our strengths and open new opportunities.
Looking forward
During the subsequent conference call, CFO Robynne Sisco also told investors that Workday sees third-quarter revenue of $918 million to $920 million -- good for 27% growth at the midpoint and well above the $912 million most analysts were modeling -- including professional services revenue of $135 million and subscription revenue ranging from $783 million to $785 million.
As such, Workday now expects full fiscal-year 2020 revenue of $3.58 billion to $3.59 billion, an increase from $3.545 billion to $3.56 billion previously. This assumes subscription revenue of $3.06 billion to $3.07 billion (raised from $3.045 billion to $3.06 billion before), and $520 million in professional services revenue (an increase of $20 million from its old target).
All told, you'll be hard pressed to find any rational investor who isn't pleased with the momentum of Workday's underlying business and, consequently, both its resulting quarterly performance and freshly raised full-year outlook.
