What Is Workday Waiting For?
Discussing Workday Operational Health And How An Acquisition Makes Sense
Dallas Salazar • 13 Comments
Dallas Salazar • 13 Comments
Following Up On A Workday Short
Amit Ghate • 16 Comments
Amit Ghate • 16 Comments
Wed, Jun. 1, 2:58 PM
- After opening low following its post-earnings decline last night, business software firm Workday (NYSE:WDAY) has climbed with the market to log a 0.9% gain so far today.
- Analysts have largely reiterated their existing stances on the stock -- mainly Buys and Holds -- as the company beat expectations and guided strong but saw billings growth slowing.
- Citigroup's Walter Pritchard summed up a number of views: “Stock was controversial into the print, and we see Q1 results and outlook as good enough."
- Goldman Sachs (Neutral) took the opportunity to raise its price target, to $80 from $71 (implying about 5% upside ahead). Meanwhile, Piper Jaffray (Hold) saw the report and lowered its target, to $74. Shares are at $76.46, in the red for 2016 but up 56% since early February.
- “We could see some (stock) pressure as the billings outperformance this quarter was more muted, though the raised billings view and pipeline commentary should limit any downside,” wrote Justin Furby of William Blair.
Tue, May 31, 4:28 PM
- With shares up sharply from their February lows going into earnings, investors are in profit-taking mode (for now, at least) after Workday (NYSE:WDAY) beat FQ1 estimates and offered slightly above-consensus FQ2 sales guidance. The stock is currently down 3.9% after hours to $72.85.
- FQ1 top-line metrics are solid: Cloud app subscription revenue rose 39% Y/Y to $280M, and professional services revenue grew 31% to $65.4M. The unearned revenue balance rose 42% to $926.1M, a growth rate on par with FQ4's in spite of a slowdown in revenue growth to 38% from 43%.
- GAAP costs/expenses rose 38% Y/Y to $419.1M, with sales/marketing accounting for $127.5M and R&D $141.8M. Op. cash flow and free cash flow for the last 12 months are respectively $327.9M and $188.1M. Workday ended FQ1 with $2.1B in cash/investments and $514M in convertible debt.
- Wedbush downgraded ahead of earnings last Friday, citing soft reseller checks and Workday's performance since February.
- Workday's results/guidance, earnings release
Tue, May 31, 4:04 PM
Mon, May 30, 5:35 PM
Thu, Apr. 21, 1:09 PM
- Three months ago, cloud/SaaS software firms sold off after cloud IT service management software (ITSM) firm ServiceNow (NOW +14.5%) missed its Q4 billings guidance and offered light 2016 sales guidance. Today, the group is rallying after ServiceNow beat Q1 estimates, provided in-line guidance, and reported billings of $376.7M, up 41% Y/Y and beating guidance of $360M-$365M. The company also reported a 48% Y/Y increase in clients with over $1M in annualized contract value, to 249.
- Cloud gainers include HR/financials software leader Workday (WDAY +2.3%), ERP/commerce software firm NetSuite (N +4.9%), marketing automation software firms Marketo (MKTO +3.1%) and HubSpot (HUBS +3.2%), talent management software firm Cornerstone OnDemand (CSOD +2.9%), customer support software firm Zendesk (ZEN +3.8%), collaboration/project management software firm Atlassian (TEAM +2.6%), enterprise healthcare software firm Castlight (CSLT +5.4%), and life sciences software firm Veeva (VEEV +2.4%). The Nasdaq is nearly flat.
- BTIG's Joel Fishbein has hiked his ServiceNow target by $5 to $85, while reiterating a Buy rating. "Strong results across the board suggest that the company continues to see success both in core ITSM and as a broader enterprise service tool. After enjoying most of its public life as a beat-and-raise stock, 2015 was somewhat messy; strong growth and good [key performance indicators] supportive of the bull thesis were overshadowed throughout the year by minor miscues -- a forecasting error, currency adjustments, and inconsistent billings reporting.
However, 1Q was clean, with strong billings growth, healthy upsells, and metrics showing growing contribution from non-IT services. Law of large numbers is still looming on the horizon but ServiceNow is on the path of being one of a few elite category-leading enterprise SaaS companies. We continue to be buyers of NOW."
Tue, Mar. 1, 1:25 PM
- Down slightly for a while yesterday after issuing light FQ1 sales guidance and roughly in-line FY17 sales guidance to go with an FQ4 beat, Workday (WDAY +9.6%) is now flying higher. JPMorgan and Cross Research have upgraded to bullish ratings.
- Workday's 43% Y/Y FQ4 billings growth has been well-received, and so has its guidance for ~30% FY17 billings growth and accelerating net new annual contract value (ACV) growth. Billings growth contributed to a 42% Y/Y increase in Workday's unearned revenue balance to $900M.
- FBR's Samad Samana (Outperform, $80 target): "A record level of new customer additions (>120 overall; >40 for financials) and high attach rates for add-on products drove billings upside. The strong demand environment for both HCM and financials [software] in F4Q, a robust pipeline, investments for growth, and a host of new products to be released this year also supported the above-consensus FY17 billings guidance and belief that new ACV will accelerate in FY17.
Samana also notes Workday's sales guidance would've been better if not for the de-emphasizing of professional services. He considers Workday's margin outlook (profitability is expected in FY18) disappointing, but nonetheless thinks "investors will appreciate WDAY can deliver mid-30s organic growth, even as it has surpassed the $1B subscription revenue run-rate, and will patiently wait for margin expansion down the road."
- Needham's Scott Berg (Buy, $80 target): "Our checks have been ahead of the increased traction in Financials and with sales pipeline activity up 150% Y/Y entering FY17, we believe the strong 4Q Financials sales traction likely sets up for a materially better year for Financials sales. We also like WDAY’s move to shift more services to partners as it incentivizes more channel sales and makes the WDAY model more profitable."
- Brean's Yun Kim (Hold) is more cautious. "While the subscription backlog grew 62%, we remain uncertain how much of that was driven by new business bookings vs. increase in contract length (2 months) and favorable contract terms ... Overall, given lack of transparency into its new business bookings, we believe there will likely be a high degree of uncertainty that exists among investors regarding its true sales momentum."
- On the earnings call (transcript), CEO Aneel Bhusri stated Workday ended FQ4 with 1,181 customers, with Financials clients growing by over 40 to 207 and Recruiting clients rising to 545. He added 30% of new customers are subscribing to Workday's full platform, and claimed FQ4 win rates were "the higher we have seen over the past eight quarters," with "historically strong" win rates posted against SAP and Oracle.
- Though GAAP net loss totaled $289.9M in FY16 and non-GAAP net loss $2.5M, Workday produced $125M in free cash flow thanks to billings/deferred revenue growth. The company ended FY16 with $1.97B in cash and $507M in convertible debt.
- Workday's results/guidance, earnings release
Mon, Feb. 29, 4:07 PM
- Workday (NYSE:WDAY): FQ4 EPS of -$0.01 beats by $0.04.
- Revenue of $323.4M (+42.9% Y/Y) beats by $3.77M.
- Expects FQ1 revenue of $337M-$339M, below a $343.1M consensus. Expects FY17 (ends Jan. '17) revenue of $1.54B-$1.55B vs. a $1.55B consensus.
- Raises FQ1 billings guidance to $360M-$365M from $350M. Expects FY17 billings of $1.855B-$1.875B.
- Shares -1.6% after hours.
- Press Release
Sun, Feb. 28, 5:35 PM
Nov. 20, 2015, 3:56 PM
- "We think it’s reasonable to surmise that Oracle’s (NYSE:ORCL) push to blunt Workday’s (WDAY -1.4%) momentum in its PeopleSoft base is having some impact, or at least lengthening Workday’s sales cycles as per our integrator checks," writes Wedbush's Steve Koenig, downgrading the cloud HR/financials software leader to Neutral after it offered light FQ4 guidance to go with an FQ3 beat. His target has been cut by $15 to $84.
- Koenig, whose remarks come six months after Jefferies reported Oracle is pricing aggressively against Workday, also calls FQ3 revenue (though above consensus) "somewhat disappointing," and notes subscription revenue growth has dropped to 48% Y/Y from Q1's 63%. He adds Workday has been offering more flexible payment terms to counter Oracle, and that this is expected to "result in a three-point headwind to fourth-quarter subscription revenue and five points next year," before normalizing in FY18 (ends Jan. '18).
- William Blair's Justin Furby (Outperform) is less troubled by Workday's FQ4 outlook, noting the subscription shortfall is solely the result of payment term changes and that management often guides conservatively. He adds Workday originally guided for "no more than 40%" FY16 sales growth, and is now on track to post 47%+ growth.
- On its earnings call (transcript), Workday said it's "building our investment and hiring models assuming total revenue growth of above 30% for fiscal 2017." Consensus is for 37.2% growth.
- Drexel Hamilton's Brian White (Buy) is pleased with growing financials software traction, as well as the recent unveiling of several other apps (Learning, Planning, Payroll, Insight Applications). Wunderlich's Rob Breza (Hold) isn't as impressed. "Conf.call highlights focused on the Financials offering, with ~90 customers live vs. 80 in the prior quarter, which is likely to leave investors feeling uninspired. Investors are left waiting for meaningful Financials acceleration to offset the HCM deceleration as new HCM products reach [general availability] in 2H16."
Nov. 19, 2015, 4:08 PM
- Workday (NYSE:WDAY): FQ3 GAAP EPS of-$0.41 not comparable with -$0.04 non-GAAP consensus. Non-GAAP net loss was $373K.
- Revenue of $305.3M (+42.0% Y/Y) beats by $1.82M.
- Expects FQ4 revenue of $317M-$320M (+40%-41% Y/Y), below a $320.3M consensus.
- Shares -2.6% after hours.
Nov. 18, 2015, 5:35 PM
Nov. 6, 2015, 12:22 PM
- In addition to beating FQ1 estimates, Paylocity (NASDAQ:PCTY) is guiding for FQ2 revenue of $48M-$49M and EPS of -$0.04 to -$0.02, above a consensus of $45.4M and -$0.08. The company also now expects FY16 (ends June '16) revenue of $210M-$214M and EPS of $0.04-$0.07, above a consensus of $201.6M and -$0.05.
- Cloud HR/HCM software leader Workday (WDAY +2.5%) is following Paylocity higher. Cornerstone OnDemand's strong 2016 outlook might also be helping. Two days ago, Paylocity rallied in response to Paycom's Q3 beat and strong Q4 guidance. Workday's FQ3 report is expected later this month.
- Paylocity CEO Steve Beauchamp: "We continue to see strong demand for our unified payroll and HCM platform and are encouraged by the response to our ACA Enhanced product offering," Adjusted gross margin rose 450 bps Y/Y to 58.8%. GAAP operating expenses rose 37% Y/Y to $28.3M.
- Paylocity's Q3 beat, PR
Aug. 26, 2015, 5:24 PM
- After briefly rising, Workday (NYSE:WDAY) is now down 0.7% after hours after posting an FQ2 beat and guiding in-line. Shares rose 3.5% in regular trading as markets surged.
- Though Workday didn't provide a non-GAAP EPS number in its FQ2 report, it did state non-GAAP net income was $3.8M. That implies EPS of $0.02, above a -$0.06 consensus.
- The cloud HCM/financials leader says it topped 1K customers during FQ2; it ended FQ1 with 925+. Subscription revenue rose 56% Y/Y to $223.7M, and professional services revenue 37% to $58.9M. On the earnings call, Workday states billings rose 51% Y/Y (even with revenue growth), and that FQ2 win rates were above FQ1 levels. The unearned revenue balance rose 42% Y/Y to $683.1M.
- Free cash flow was -$10.3M, but totals $77.6M for the trailing 12 months. GAAP costs/expenses rose 41% Y/Y to $350.4M - sales/marketing spend totaled $106.4M, and R&D $115.3M. Workday ended FQ2 with $1.9B in cash/investments, and $502M in convertible debt.
- Workday Planning, a budgeting/forecasting app that pushes the company deeper into the traditional ERP software market (SAP's historical stronghold), will become generally available next year.
- FQ2 results/FQ3 guidance, PR
- Update (5:30PM ET): Workday has guided on its call for FY16 (ends Jan. '16) revenue of $1.15B-$1.158B, above a $1.14B consensus. Shares now -3.3% AH.
Aug. 26, 2015, 4:07 PM
- Workday (NYSE:WDAY): FQ2 GAAP EPS of -$0.37 not comparable with -$0.06 non-GAAP consensus.
- Revenue of $282.7M (+51.4% Y/Y) beats by $8.63M.
- Expects FQ3 revenue of $300M-$303M (+39%-41% Y/Y) vs. a $302.1M consensus.
- Shares nearly flat after hours.
- Update (4:23PM ET): Workday is now up 5.4%.
- Update 2 (5:25PM ET): Workday has given back its gains: Shares are now down 0.7%. More details on the FQ2 report here.
- Update 3 (5:38PM ET): Shares are now down 4.8%.
Aug. 25, 2015, 5:35 PM
Workday, Inc. provides enterprise cloud applications for human capital management, payroll, financial management and analytics. It offers innovative and adaptable technology focused on the consumer Internet experience and cloud delivery model. The company applications are designed for global... More
Industry: Application Software
Country: United States
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