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Why Is Workday (WDAY) Up 2.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Workday (WDAY - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Workday due for a pullback? 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 drivers.
Workday Q4 Earnings Beat Estimates on Revenue Growth
Workday reported solid fourth-quarter fiscal 2022 results (ended Jan 31, 2022) with a year-over-year increase in revenues and non-GAAP earnings, backed by healthy demand trends. The company expects this momentum to continue in fiscal 2023 with the gradual revival of business operations in the post-pandemic era.
Quarter Details
Net loss in the reported quarter was $73.3 million or a loss of 29 cents per share compared with $71.7 million or a loss of 30 cents per share in the year-earlier quarter. Despite top-line growth, the company recorded a wider loss on an absolute basis owing to higher operating expenses.
Non-GAAP net income in the quarter improved to $206 million or 78 cents per share from $184.6 million or 73 cents per share in the year-ago quarter, and surpassed the Zacks Consensus Estimate by 7 cents.
In fiscal 2022, Workday registered a net income of $29.4 million or 12 cents per share against a net loss of $282.4 million or a loss of $1.19 per share in fiscal 2021, primarily driven by higher revenues. Non-GAAP net income in fiscal 2022 improved to $1,038.7 million or $3.99 per share from $724.2 million or $2.93 per share in fiscal 2021.
Revenues
Total quarterly revenues aggregated $1,376.1 million compared with $1,131.7 million in fourth-quarter fiscal 2021 and beat the consensus estimate of $1,364 million. Subscription services revenues (89.3% of total revenues) rallied 22.2% year over year to $1,229.2 million on the back of an expanding customer base. Workday customer community now includes more than 50% of the Fortune 500, of which, roughly 90% are using its products regularly. Subscription revenue backlog was $12.81 billion, up 26.9% year over year. Professional services’ revenues (10.7% of total revenues) increased 17.2% to $147 million.
In fiscal 2022, total revenues were up 19% year over year to $5,138.8 million, largely driven by higher subscription revenues (up 20%) of $4,546.3 million led by higher customer contracts and strong customer renewals, with gross retention of more than 95%.
Operating expenses in the reported quarter were $1,477.1 million compared with $1,205 million in the prior year, resulting in respective operating loss of $101 million and $73.3 million.
Balance Sheet & Cash Flow
As of Jan 31, 2022, cash and cash equivalents were $1,534.3 million with total debt (current and non-current) of $1,839.8 million compared with respective tallies of $1,384.2 million and $1,795 million in the prior-year period. In fiscal 2022, Workday generated an operating cash flow of $1,650.7 million compared with $1,268.4 million in fiscal 2021.
Guidance
With solid quarterly and fiscal results, Workday expects its fiscal 2023 subscription services revenues in the range of $5,530-$5,550 million. Non-GAAP operating margin is anticipated to be 18.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted -16.42% due to these changes.
VGM Scores
At this time, Workday has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Workday has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Workday (WDAY) Up 2.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Workday (WDAY - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Workday due for a pullback? 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 drivers.
Workday Q4 Earnings Beat Estimates on Revenue Growth
Workday reported solid fourth-quarter fiscal 2022 results (ended Jan 31, 2022) with a year-over-year increase in revenues and non-GAAP earnings, backed by healthy demand trends. The company expects this momentum to continue in fiscal 2023 with the gradual revival of business operations in the post-pandemic era.
Quarter Details
Net loss in the reported quarter was $73.3 million or a loss of 29 cents per share compared with $71.7 million or a loss of 30 cents per share in the year-earlier quarter. Despite top-line growth, the company recorded a wider loss on an absolute basis owing to higher operating expenses.
Non-GAAP net income in the quarter improved to $206 million or 78 cents per share from $184.6 million or 73 cents per share in the year-ago quarter, and surpassed the Zacks Consensus Estimate by 7 cents.
In fiscal 2022, Workday registered a net income of $29.4 million or 12 cents per share against a net loss of $282.4 million or a loss of $1.19 per share in fiscal 2021, primarily driven by higher revenues. Non-GAAP net income in fiscal 2022 improved to $1,038.7 million or $3.99 per share from $724.2 million or $2.93 per share in fiscal 2021.
Revenues
Total quarterly revenues aggregated $1,376.1 million compared with $1,131.7 million in fourth-quarter fiscal 2021 and beat the consensus estimate of $1,364 million. Subscription services revenues (89.3% of total revenues) rallied 22.2% year over year to $1,229.2 million on the back of an expanding customer base. Workday customer community now includes more than 50% of the Fortune 500, of which, roughly 90% are using its products regularly. Subscription revenue backlog was $12.81 billion, up 26.9% year over year. Professional services’ revenues (10.7% of total revenues) increased 17.2% to $147 million.
In fiscal 2022, total revenues were up 19% year over year to $5,138.8 million, largely driven by higher subscription revenues (up 20%) of $4,546.3 million led by higher customer contracts and strong customer renewals, with gross retention of more than 95%.
Operating expenses in the reported quarter were $1,477.1 million compared with $1,205 million in the prior year, resulting in respective operating loss of $101 million and $73.3 million.
Balance Sheet & Cash Flow
As of Jan 31, 2022, cash and cash equivalents were $1,534.3 million with total debt (current and non-current) of $1,839.8 million compared with respective tallies of $1,384.2 million and $1,795 million in the prior-year period. In fiscal 2022, Workday generated an operating cash flow of $1,650.7 million compared with $1,268.4 million in fiscal 2021.
Guidance
With solid quarterly and fiscal results, Workday expects its fiscal 2023 subscription services revenues in the range of $5,530-$5,550 million. Non-GAAP operating margin is anticipated to be 18.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted -16.42% due to these changes.
VGM Scores
At this time, Workday has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Workday has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.