The HCM (Human Capital Management) is anticipated to grow at a CAGR (Compound Annual Growth Rate) of 9.8% from 2014 to 2019. The market size of the HCM is anticipated to grow from $17.49 billion in 2014 to $17 billion by 2019. This market size has leveraged various Tech companies to influence its top and bottom line. Workday (WDAY, Financial) is one such company that eyes this mammoth market has been performing strong, much to the delight of its investor’s. Ever since the company went public back in Oct 2012, it has been delivering strong results.
Strong quarter
The company recently declared its last quarter results for the fiscal 2014 and continued to display strong results. The revenues grew 59% year over year, to record $226.3 million as compared to $141.9 million in the same term last year.
The primary business model of the company is cloud based subscription. The subscription revenue grew 64% year over year to record $181.9 million as compared to $110.7 million in the same quarter last year.
On annual basis, fiscal 2015 record extraordinary growth on financial operating metrics. Consolidated revenue increased 68% to records $788 million and subscription revenues gained 73% to record $613 million.
Furthermore the major revenue for the company is from US region so it had minimum impact of exchange rates.
Journey Ahead
In fiscal 2016, the company is offering subscription contracts in six foreign currencies and is anticipating higher percentage of non US dollar bookings as compared to past.
Looking ahead, the company expects a strong growth. The company and foresees a cumulative revenue of $1.150 billion to $1.140 billion and this is a growth of 42% to 45%.
Subscription revenues for the fiscal 2016 are also anticipated to grow in the range of 47% to 50% to record $900 million to $920 million.
For the first quarter, the consolidated revenue is anticipated to be in the range of $242 million to $245 million, a year-over-year growth of 51% to 53%. The subscription revenue in the first quarter is expected to be in the high-low range of $195 million to $197 million, growth of 58% to 60%
Market analysts are very optimist about Workday’s growth. The consensus of analysts anticipates growth of 100% next year as against the industry growth of 22.3% and sector growth of 25.7%. The company is also anticipated to attain a growth of 50% every year, in next five years.
Tailwinds
The company has been gaining higher confidence among its customers, this is leveraged by the increased contract duration that the company has signed in the quarter, and this will influence future growth for the company with sustained revenue from subscription. The weighted average term of new contracts signed in the Q4-2015 was 3.9 years. This is the highest terms for the company considering its historical pattern of contracts.
Fast Retailing Co Ltd a leader in apparel retail, has selected workday to provide HCM solution on cloud. Fast Retailing operates with over 2800 stores located globally. This will influence the growth of Workday in the upcoming quarters with an impressive top and bottom line.
Conclusion
The company ended the fiscal year with around $1.9 billion of cash, this is quite good. The company has gained a lead as SaaS provider for providing HR application on cloud and with Salesforce eyeing this company for acquisition, this company is worth a take. I think there's still lot of worth in Workday and a investor can go bullish with this company.
