Workday: Core Holding in the Cloud

09/27/2017 5:00 am EST


Rob DeFrancesco

Founder, Tech-Stock Prospector

Workday (WDAY) gave a standout performance this past earnings season, reporting fiscal Quarter 2 (July) EPS of 24 cents, nine cents above the consensus estimate says Rob DeFrancesco, editor of the Tech-Stock Prospector.

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The firm reported revenue of $525.3 million (up 40% from the year ago level, acceleration from 38% growth in the previous quarter), vs. the consensus of $506.9 million.

The company has about 1,800 customers for its cloud-based human capital management (HCM) and financial management solutions, with 70% of them live on the platform.


Workday management likes to boast about the number of accounts in production because it has a better record of getting customers up and running in the cloud than some legacy enterprise vendors. Over 30% of the Fortune 500 have now selected Workday.

Subscription revenue in the second quarter rose 42%, topping the average growth rate of 39% for the previous four quarters. Professional services revenue of $91 million rose 34% and beat guidance of $85 million. International revenue (20% of total revenue) surged 59%.

Workday has built up a steady flow of future business. The company is sitting on $1.2 billion of unearned revenue (+26% year over year), including $1.1 billion expected to be realized over the next 12 months.

Given the positive momentum in the business, Workday was able to raise its fiscal year 2018 (Jan.) revenue guidance range once again. The latest consensus revenue estimate for the year of $2.1 billion represents growth of 33.9%. Workday remains a core cloud-software holding in our Vulture Model Portfolio.

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