Workday (WDAY, Financial), one of the distinguished leaders in the enterprise cloud applications for human resources, financial and recruitment software, announced attractive 74% growth in revenue, driven by solid performance for its web-based human resources and financial management software solutions. Its revenue for the second-quarter came in at $186.8 million from $107.6 million in the same quarter a year earlier, beating the analysts’ forecasts of $177.5 million in revenue for the quarter.
However, continuous investment in product enhancement, sales and marketing and employee enlargement has accelerated its net loss, including items to $69.2 million or earnings of $0.38 per share, as compared to $36 million or earnings of $0.21 per share last year in the second-quarter. Its non-GAAP loss came in at $0.11 per share against $0.14 loss per share estimated by the analysts for the quarter.
Strong outlook
Looking ahead, Workday has raised its full-year outlook for the top line. The company now expects revenue to be in the range of $760 million to $770 million, reflecting a yearly growth of 62% to 64%, up from its earlier guidance of $730 million to $750 million, while analysts were modeling revenue of $748.7 million for the full year that is expected to be closing January 31, 2015. In addition, Workday has also increased its full-year billing guidance to $940 million to $960 million from $890 million to $910 million that highlights strong growth for its sales for the full year. Its subscription revenue is expected to be within a range of $592 million to $602 million, displaying a yearly growth of 67% to 70%.
Workday also expects its revenue for the third-quarter to get settled between $200 million and $205 million, up about 56% to 60% year-over-year that beats the analysts’ estimates of $195.6 million for the third-quarter 2014. Its subscription revenue is forecasted to be in the range of $155 million to $160 million, highlighting a year-over-year growth of 65% to 70%.
Rich growth ahead for its human capital management solutions
Workday has tremendous opportunity to capitalize on as the recent report by IDC suggests that the human capital market hand market opportunity of about $10.4 billion in 2013, an uptick of around 9.1% over 2012. Further, the report unveils a huge opportunity of $15.4 billion for human resources applications worldwide through 2013-2018, expected to grow at a compounded average growth rate of 8.2%.
Workday has so far built a strong portfolio of about 700 customers for its human management application, and close to 100 customers for its financial application solutions. Also, the company has wide range of customer mix consisting of large to medium-sized customers at its folds that continue to avail its web-based human resources and financial management applications software.
In addition, Workday has been observing growing momentum for its financial applications solutions, as new customers from a wide range of industries are adopting its financial services. For example, during the second-quarter, Unum, a Fortune 500 company and one of the biggest companies in financial protection, opted for Workday’s financial and HR application software that should add value to its increasing strong portfolio of customers going forward.
Winning over customers
Meanwhile, Workday is also excited as Bank of America (BAC, Financial)Â has agreed to avail its HR and Financial services across its branches worldwide. Workday is expected to benefit remarkably from Bank of America as it is one of the largest customers the company has owned so far for its world-class cloud-based solutions for HR and Financial applications. The company is observing significant progress in Europe with couple of potential clients that are expected to soon availing its innovative solutions.
Workday is expected to provide the details of these customers at the next Analysts Day, which is around the corner. Workday remains on track to aggressively invest in the workforce to better support its growing customers around the world. Workday is also committed to create about 200 new positions in Ireland over the next two to three years.
Furthermore, Workday is experiencing positive growth for its ecosystem services as the existing customers such as HP as CSC, who recently announced that it will offer enterprise application services for deploying Workday’s services to new customers through their expertise on cloud, mobile, analytics and big data platform integrated with Workday’s services going forward. Apart from these the company will also benefit from the annual contract value or ACV, as the renewal for its innovative solutions crossed over $10 million for the first time in its history.
Additionally, the company remains focused on retaining its customers once it equips them with its services with greater focus on satisfaction, while deploying new software applications for them. It is concentrating on various strategies such as renewal of the software applications and promotional offers for order bookings that should further assist the company to add new clients to its folds and increase its margin.
Workday is also investing in the data centers, new product initiatives and expansion of its facilities that should augment its growth in coming years. Workday is expected to invest about $100 million to $110 million in CapEx during FY 2015 for its sites as per the expansion plan of its facilities.
Wrapping it up
Workday looks solid in the future with strength in its business model that will certainly assist the company to carry forward the momentum and yield strong revenue. In addition, the analysts have estimated CAGR of 42% which is double the average industry CAGR of 21.35% for the next five years that indicate strong prospects for the company in the long-run. So, investors can certainly pick the stock that has a lot of room to grow in the future.
