As the sun is rising on cloud-enabled services, many companies are joining the cloud band wagon. Workday does not want to miss this opportunity and is focused on the cloud market. It also entered into a strategic tie-in with bigger players like Salesforce (CRM) to broaden its horizon. Workday (WDAY, Financial) is a well-known player in the cloud-enabled solutions and a tie-in with Salesforce looks like good news for both companies.
Financial growth
Workday is a subscription-based cloud-enabled software solution provider. The main software solutions provided by Workday relate to financial management and human capital management. The company has been recording high growth rate in revenues. It recently declared its quarterly and annual report, the result were outstanding.
For Q2-2015, it recorded revenue of $186.8 million, increased by 74% year over year. The company provides HR and financial solutions on cloud provided as a SaaS-based subscription model. This model contributes to around 77% of the total revenue generated. Subscription revenue was up by 77% year over year, to a record 143.7 million.
Even in the last fiscal year, total revenue generated was 468.9 million this again is 71% growth as compared to fiscal 2013.
The growth in revenue is mainly accountable with strong demand of cloud enabled service provided by Workday.
Journey ahead
The company is all set to establish its footprints globally. It eyes the European market, and it plans to release Workday Payroll for France and the U.K. The release of payroll systems for these regions is targeted by 2016. Workday is expected to grow at a solid pace going forward. In fact, Yahoo Finance estimates suggest that Workday's earnings will grow at a terrific annual rate of 48.8% for the next five years. This is certainly an impressive growth rate and tie-ins with bigger companies such as Salesforce.com should also aid Workday's growth.
For the fiscal 2015, the company anticipates total revenue to be in the range of $760 and $770 million, or growth of 62% to 64%.
"We had a solid second quarter and continued to make strong progress with our investments in Workday Financial Management and our growth outside the U.S.," said Aneel Bhusri, co-founder and CEO, Workday. "As we execute on the second half of our fiscal year, we see significant momentum as customers continue to make the switch to the cloud for their HR and finance applications, and we remain tightly focused on delivering rapid product innovation with high levels of customer satisfaction to help them transform their businesses for the future."
Working on customer’s feedback
The company has been meticulously enhancing the features of the software with user friendly interface to target a wider customer base and keep the existing customers satisfied. Customers are provided with regular updates which helps Workday in retaining the existing clients with new clients being added regularly. Updates for Workday 21 provide 240 new features in HR and finance modules. 65 out of 241 features were based on the feedback provided by the existing customers. This year, the company conducted a mega event “Rising Europe” as a part of its customer feedback program. This event basically targets one to one interaction with customers for feedbacks and suggestions.
Conclusion
Workday is not expected to be profitable any time soon as it invests in its growth, but analysts expect solid long-term performance. The company has beaten earnings estimates comprehensively in the last four quarters this further gains the investor confidence. Hence, it looks as if Workday has been making the right moves to grow its business and its better-than-expected performance could continue with the proliferation of cloud computing.
Investors with a higher risk appetite would probably like Workday more due to its terrific earnings growth estimates.
