In This Article:
A month has gone by since the last earnings report for Workday (WDAY). Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Workday due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Workday Beats on Q2 Earnings & Revenues Estimates
Workday delivered second-quarter fiscal 2020 non-GAAP earnings of 44 cents per share, which beat the Zacks Consensus Estimate of 35 cents. The figure also improved from 31 cents reported in the year-ago quarter.
Robust growth can primarily be attributed to an improvement of 32.2% in revenues, which totaled $887.8 million. The figure outpaced the Zacks Consensus Estimate for revenues of $872 million. The upside was driven by solid growth in subscription and professional services revenues.
Quarter in Detail
Subscription services revenues (85.3% of total revenues) rallied 34% year over year to $757.2 million on the back of expanding customer base and robust net new ACV growth. Further, synergies from Adaptive Insights acquisition and strong product suite drove revenues in the reported quarter. The figure surpassed management’s guidance of $746-$748 million.
Backlogs from Subscription revenue came in at $7.03 billion, up 27% year over year, primarily on the back of growth in net new bookings along with “add-on business and net retention.”
Professional services revenues (14.7% of total revenues) grew 23% from the year-ago quarter’s tally to $130.6 million and surpassed the guidance of $124 million.
Revenues outside the United States improved 35% to $211 million and contributed approximately 24% to total revenues.
In the quarter, the company the upcoming Workday 33 release, with advanced features to aid resource managers support skills resources to projects and provide deeper integration between Workday and Adaptive Insights.
The company witnessed rapid deployment of HCM solution in the second quarter. It was chosen by the likes of Gap, Stanley Black & Decker and Rockwell Automation in North America, Aldi Stores Limited in Europe, and Bunnings Group Limited in Asia-Pacific.
Management is also optimistic regarding the growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings.
The company generated non-GAAP operating margin of 13.2% during the quarter, compared with the year-ago quarter’s figure of 13.1%. The year-over-year margin expansion can be attributed to higher revenue base and cost control measures.