Workday
Workday, the human resources, finance, and cloud software company reported better-than-expected second quarter revenue and earnings.
The company recorded revenue of $1.06 billion, a 19.4% rise year-on-year. Subscription services, which makes up the bulk (87%) of the company’s sales, increased by 23% over the same period a year earlier, whilst the costs associated with those services only increased 19.7% over the same period. Revenue from professional services, which makes up the remianing 13% of the company’s sales, was flat - but it’s related costs fell 4%. Product development costs increased by 10.7% to $418.6 million, however total overall costs and expenses were kept relatively tight, rising by 6.7% year-on-year.
The company made an operating loss of $16.75 million, an improvement on the $120.7 million loss it made in the same quareter a year ago. The net loss came in at $28 million from a loss of $120 million previously.
Adjusted earnings (non-GAAP) came in 84 cents per share, higher than the 66 cents the market was expecting. That is after stripping out share-based compensation expenses which amounts to $251.2 million.
The company ended the period with total cash, cash equivalents of $1.25 billion dollars and total laibilities of $4.67 billion (more than half of which is short term debt).
Workday increased its guidance for FY 2021, and said it’s seeing growth among companies that need help keeping them engaged with employees who are working remotely due to Covid-19. It has also partnered with IBM to assist companies in preparing their post-Covid-19 workplaces.
The company announced Chano Fernandez as co-CEO, returning to a dual leadership structure it had at the time of its 2012 IPO, when co-founders Aneel Bhusri and Dave Duffield shared the role. Dave Duffield stepped down to assume the role of chairman. Fernandez, who worked at software giant SAP previously as VP, will run Workday’s sales, marketing and customer support, whilst Bhusri will focus on product and strategy.
Workday has impressive demand for its Software-as-a-service (SaaS) products, and invests back into the business, but it does not currently exhibit the fundamental valuation characteristics we look for in companies in which we invest.
