We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Workday (WDAY) Down 1.4% Since Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Workday, Inc. (WDAY - Free Report) . Shares have lost about 1.4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is WDAY due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Workday delivered fourth-quarter fiscal 2018 non-GAAP earnings of 28 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The figure also improved on a year-over-year basis.
Strong growth can primarily be attributed to 33% jump in revenues, which totaled $582.5 million. The figure surpassed the guidance of $538-$540 million and surpassed the Zacks Consensus Estimate for revenues of $574 million. The robust top-line performance was driven by solid growth in subscription and professional revenues.
Subscription revenues (84.1% of total revenues) surged 33.7% year over year to $490 million, driven by expanding customer base. The figure surpassed the guidance of $482-$484 million. Annual customer satisfaction rating was 98%.
Professional services revenues (15.9% of total revenues) grew 26.7% from the year-ago quarter to $92.5 million and were better than the guidance of $89 million.
Revenues outside the United States soared 53% to $131 million, representing a record 22% of total revenues in the quarter.
During the quarter, Workday extended capabilities and tools in Workday HCM with new customer experience.
Workday added 58 financial management customers, up 45% from the year-ago quarter. The clientele now includes two Fortune 500 customers, one of which is a Fortune 100 company. Some other new financial management customers include American Family Mutual Insurance and Quicken Loans.
Further, the company won 60 planning customers. Total planning customers on Workday’s platform totals more than 250 our total number of financial management customers totaled more than 450.
Workday announced the availability of Workday Prism Analytics and Workday Cloud Platform, the first offering delivered on Workday Data-as-a-Service, during the quarter.
Workday was placed in the Leaders quadrant of “Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises” by Gartner.
Buyouts
Workday announced partnership with Duo Security to integrate the latter’s multi-factor authentication (“MFA”) technology. This will enhance security and improve functionality of Workday’s user interface.
Workday also acquired SkipFlag during the quarter, marking another step in its efforts to invest in areas such as machine learning, advanced search and natural language processing.
Operating Results
Gross margin expanded 30 basis points (bps) from the year-ago quarter to 70.7%, primarily owing to favorable mix toward higher-margin subscription revenues.
Product development expenses jumped 32.3% to $253.5 million. Sales and marketing expenses increased 17.2% to $179.6 million. General and administrative expenses climbed 11.8% to $59.8 million.
The company reported non-GAAP operating profit of $55.5 million compared with $25.3 million in the year-ago quarter. Non-GAAP operating margin came in at 9.5% during the quarter as compared with 5.8% reported in the year-ago quarter.
Balance Sheet
Cash, cash equivalents and marketable securities were $3.27 billion as of Jan 31, 2018.
Operating cash flows were $126.5 million and free cash flows were $90.5 million.
Unearned revenues were more than $1.5 billion, up 25.8% from the year-ago quarter. Current unearned revenues (that will be recognized over the next 12 months) were more than $1.4 billion, representing annual growth of 31.3%.
Non-current unearned revenues declined 18% year over year as fewer customers opted for paying more than one year of subscription fees upfront.
Subscription revenue backlog, which represents all future revenues from existing customer subscription contracts, both on and off-balance sheet was $5.2 billion, up 34.4% year over year.
Guidance
For first-quarter fiscal 2019, Workday expects subscription revenues in the range of $514-$516 million (up 29%), while professional services revenue expectation is $93 million (up 16%).
Workday anticipates non-GAAP operating margin of 10-11%.
For fiscal 2019, Workday expects subscription revenues in the range of $2.265 billion to $2.280 billion (up 27-28%), while professional services revenue expectation is $405 million (up 14%).
The company now expects non-GAAP operating margin to be almost 12%.
The company expects operating cash flow growth for fiscal 2019 to be roughly 30%, resulting in an operating cash flow margin of more than 22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to 28 lower. In the past month, the consensus estimate has shifted downward by 21% due to these changes.
At this time, WDAY has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, WDAY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Workday (WDAY) Down 1.4% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Workday, Inc. (WDAY - Free Report) . Shares have lost about 1.4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is WDAY due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Workday delivered fourth-quarter fiscal 2018 non-GAAP earnings of 28 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The figure also improved on a year-over-year basis.
Strong growth can primarily be attributed to 33% jump in revenues, which totaled $582.5 million. The figure surpassed the guidance of $538-$540 million and surpassed the Zacks Consensus Estimate for revenues of $574 million. The robust top-line performance was driven by solid growth in subscription and professional revenues.
Subscription revenues (84.1% of total revenues) surged 33.7% year over year to $490 million, driven by expanding customer base. The figure surpassed the guidance of $482-$484 million. Annual customer satisfaction rating was 98%.
Professional services revenues (15.9% of total revenues) grew 26.7% from the year-ago quarter to $92.5 million and were better than the guidance of $89 million.
Revenues outside the United States soared 53% to $131 million, representing a record 22% of total revenues in the quarter.
Customer Addition & Product Launches: Key Catalyst
During the quarter, Workday extended capabilities and tools in Workday HCM with new customer experience.
Workday added 58 financial management customers, up 45% from the year-ago quarter. The clientele now includes two Fortune 500 customers, one of which is a Fortune 100 company. Some other new financial management customers include American Family Mutual Insurance and Quicken Loans.
Further, the company won 60 planning customers. Total planning customers on Workday’s platform totals more than 250 our total number of financial management customers totaled more than 450.
Workday announced the availability of Workday Prism Analytics and Workday Cloud Platform, the first offering delivered on Workday Data-as-a-Service, during the quarter.
Workday was placed in the Leaders quadrant of “Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises” by Gartner.
Buyouts
Workday announced partnership with Duo Security to integrate the latter’s multi-factor authentication (“MFA”) technology. This will enhance security and improve functionality of Workday’s user interface.
Workday also acquired SkipFlag during the quarter, marking another step in its efforts to invest in areas such as machine learning, advanced search and natural language processing.
Operating Results
Gross margin expanded 30 basis points (bps) from the year-ago quarter to 70.7%, primarily owing to favorable mix toward higher-margin subscription revenues.
Product development expenses jumped 32.3% to $253.5 million. Sales and marketing expenses increased 17.2% to $179.6 million. General and administrative expenses climbed 11.8% to $59.8 million.
The company reported non-GAAP operating profit of $55.5 million compared with $25.3 million in the year-ago quarter. Non-GAAP operating margin came in at 9.5% during the quarter as compared with 5.8% reported in the year-ago quarter.
Balance Sheet
Cash, cash equivalents and marketable securities were $3.27 billion as of Jan 31, 2018.
Operating cash flows were $126.5 million and free cash flows were $90.5 million.
Unearned revenues were more than $1.5 billion, up 25.8% from the year-ago quarter. Current unearned revenues (that will be recognized over the next 12 months) were more than $1.4 billion, representing annual growth of 31.3%.
Non-current unearned revenues declined 18% year over year as fewer customers opted for paying more than one year of subscription fees upfront.
Subscription revenue backlog, which represents all future revenues from existing customer subscription contracts, both on and off-balance sheet was $5.2 billion, up 34.4% year over year.
Guidance
For first-quarter fiscal 2019, Workday expects subscription revenues in the range of $514-$516 million (up 29%), while professional services revenue expectation is $93 million (up 16%).
Workday anticipates non-GAAP operating margin of 10-11%.
For fiscal 2019, Workday expects subscription revenues in the range of $2.265 billion to $2.280 billion (up 27-28%), while professional services revenue expectation is $405 million (up 14%).
The company now expects non-GAAP operating margin to be almost 12%.
The company expects operating cash flow growth for fiscal 2019 to be roughly 30%, resulting in an operating cash flow margin of more than 22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to 28 lower. In the past month, the consensus estimate has shifted downward by 21% due to these changes.
Workday, Inc. Price and Consensus
Workday, Inc. Price and Consensus | Workday, Inc. Quote
VGM Scores
At this time, WDAY has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, WDAY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.