UPDATED 21:02 EST / FEBRUARY 28 2019

workday_rising CLOUD

Workday chalks up another successful quarter as subscription revenue grows

Enterprise software company Workday Inc. rounded out a solid year of progress today as it reported fourth-quarter earnings that easily surpassed expectations.

The company, which sells human capital management and enterprise financial software and competes with the likes of Oracle Corp. and Salesforce.com Inc., posted earnings before certain costs such as stock compensation of 41 cents per share. Its revenue came to $788.6 million. Wall Street had pegged Workday’s earnings at just 32 cents per share on revenue of $777.41 million.

The final quarter capped off a solid year overall for the company, which saw revenue top $2.82 billion in 2018. That was up 31.7 percent from the previous year, though it still reported a net loss of $1.93 per share for the entire 12-month period.

The results were encouraging enough, and point to further successes in the year to come. Indeed, Workday Chief Executive Officer Aneel Bhusri said he was optimistic about the company’s prospects as its transition to a subscription-based licensing model gathers steam.

“As we enter fiscal 2020, we are raising our outlook and now expect subscription revenue of $3.03 to $3.045 billion, representing year-over-year growth of approximately 27 percent to 28 percent,” he said in a statement.

One reason for this optimism is Workday’s continued ability to bring new customers into its fold. In the last quarter, its Financial Management business added 79 new “core customers,” including four from the Fortune 500. Workday’s Human Capital Management business also landed some big new customers, including Caterpillar Inc. and Wyndham Worldwide Corp.

“One interesting new trend is that we are beginning to see large enterprise companies now starting their finance and HR journeys with Workday Financial Management,” Bhusri said in a conference call. “This is a new development and something we view as a positive indication of the growing awareness of our Financial Management applications.”

Analyst Holger Mueller of Constellation Research Inc. said Workday’s rapid growth was a remarkable feat, especially its ability to keep signing up large enterprises as customers. He added that its Financial Management offering was also progressing nicely, after lagging somewhat in previous months.

“On the product side, the first live customers on a public cloud offering are a key milestone as all software-as-a-service vendors need to move to the cloud in order to reduce capital expenditure in IT and increase spending on research and development,” Mueller said. “The only downside is running at a loss of more than 30 percent, which means the road to profitability has gotten a little longer.”

Workday’s shares rose more than 2 percent in after-hours trading.

Photo: Workday

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