Equity Research 02.09.2021

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Workday Inc. (NSQ: WDAY)

 

Workday Inc. is specialized in the publishing of cloud-based management software for businesses, educational institutions, and government bodies. The group offers financial management and human resources and analytical solutions for the finance, technology, communications, professional services, healthcare, pharmaceuticals, insurance, manufacturing, distribution, hotel, higher education, and government administration sectors.

 

Number of employees: 13400 people.

Subscription revenue in the second quarter was $1.11 billion, up 20% year-over-year, driven by strong new business sales, favorable in-quarter linearity and an over-performance on customer renewals with gross retention, once again, over 95%. Professional Services revenue was $147 million, resulting in total revenue of $1.26 billion.

Revenue outside the U.S. was $318 million, up 24% yoy and representing 25% of the total. 24-month backlog at the end of the second quarter was $6.88 billion, growth of 19%. Total subscription revenue backlog was $10.58 billion, up 23%. Operating income for the second quarter was $292 million, resulting in an operating margin of 23%. Margin overachievement was driven by a combination of top line outperformance and favorable expense variances. Operating cash flow in Q2 was $198 million, growth of 26%.

 

In addition to strong profitability from main operations, during Q2 they recognized $100 million mark-to-market gain from IPO of one of their venture’s portfolio companies. The biggest investments continue to be in hiring and in attracting top talent. In the first half of the year, they hired 900 new employees, bringing the total employee count to 13,400 at the end of Q2.

The full-year target is to add 2,500 employees by the end of the year and expect the pace of hiring to increase throughout the back half of FY22.

Outlook

For Subscription revenue, they raised the full-year estimate to be in the range of $4.50 billion to $4.51 billion, 19% growth.

For Q3, they expect subscription revenue of $1.156 billion to $1.158 billion, 20% growth at the high end, and they expect 24-month backlog growth of 19%. About Professional Services,  they forecast $590 million in FY22.

SHARE PRICE – Since January 2021, the stock surge by 20%. The share price (02/09/2021) closed at $271.32 per share.

 

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