Workday Results Image credit Pixabay/GeraltWorkday revealed the results of its second quarter of 2023. Like Salesforce, its share price dropped briefly, but in Workday’s case, it rose by 1.23% by the close of the day and 11.6% after hours. However, it is still down from the high of 307.81 from last November at 181.20. The results are strong and showed growth, with total revenues up 21.9% to $1.54 billion year over year. Other figures included:

  • Subscription Revenues of $1.37 Billion, Up 22.8% Year Over Year.
  • 24-Month Subscription Revenue Backlog of $8.37 Billion, Up 21.7% Year Over Year.
  • Total Subscription Revenue Backlog of $13.47 Billion, Up 27.4% Year Over Year.
  • Operating loss was $34.1 million, or negative 2.2% of revenues, compared to an operating loss of $1.1 million, or negative 0.1% of revenues, in the same period last year.
  • Operating cash flows were $114.4 million compared to $198.5 million in the prior year.
  • Cash, cash equivalents, and marketable securities were $6.29 billion as of July 31, 2022.
Aneel Bhusri, Co-CEO and Founder Workday (Image Credit Workday)
Aneel Bhusri, Co-CEO and Founder Workday (Image Credit Workday)

Aneel Bhusri, co-founder, co-CEO, and chairman, of Workday, commented: “We continue to see a strong global demand for our products, underscoring how organizations are continuing to drive digital transformation across finance and HR to support the changing world of work. Thanks to our incredible employees and their ongoing commitment to customer service and innovation, I am confident in our ability to deliver continued value to our global customer community and capitalize on the great opportunity in front of us.”

An expanding footprint

Workday is also looking to expand into other sectors, including some of those it has previously left alone. It sees a $67 billion opportunity for its finance solutions.  These include new industries, such as energy, where it won or extended deals with American Electric Power and ExxonMobil, the mid-market and the federal government. The latter could be huge, as it recently achieved FedRAMP Authorised status at a moderate security impact level signalling its entry into that arena. It may also be attacking the manufacturing market in partnership with firms such as Salesforce and Rootstock.

Interestingly, Rootstock, a manufacturing ERP vendor built on the Salesforce platform, will attend Workday Rising this year. The firm was recently acquired by Gryphon investors and could help Workday accelerate growth in that market. They already have several joint customers.

Chano Fernandez, co-CEO, Workday commented: “Our continued momentum is a testament to our strategy, which focuses on delivering significant value to our customers and helping them adapt and grow in today’s dynamic environment. As we look to the future, we will continue to invest in key industries and our global opportunity, as well as grow our footprint with existing customers and our partner ecosystem.”

A positive outlook

Looking forward, despite the impending recession, Workday remains very positive. It has a healthy backlog, and with implementation projects presumably on track to deliver the promised revenues, it is fairly confident in the short term. Barbara Larson, chief financial officer, Workday, commented: “Our updated outlook reflects the momentum in our business and the mission-critical nature of our solutions, while also balancing the current macro environment.

“As a result, we are maintaining our guidance for fiscal 2023 subscription revenue to be in the range of $5.537 billion to $5.557 billion, representing 22% year-over-year growth. We expect third-quarter subscription revenue of $1.418 billion to $1.420 billion, growth of 21%. We are raising our fiscal 2023 non-GAAP operating margin guidance to 19.0%, reflecting the scalability of our model and our commitment to longer-term margin expansion.”

… but concerns remain

Bhusri sounded a note of caution though during the analyst call saying, “We are mindful, however, of the current macroeconomic and geopolitical environments and the impact these conditions could have on businesses globally.”

It is a situation that is fluid, and Workday is prepared to adjust its investment in growth when it perceives the need, with Fernandez commenting: “We remain very confident on the long-term opportunity. We are certainly going to be cautiously monitoring the environment.

“We are confident as well on our sales strategy from a go-to-market perspective, but we will be fine-tuning that one as the situation is evolving and as the year is moving on, either in terms of the investments that it requires or either in terms of balancing investments from one area of weakness to one area that we may perceive we have more strength and energy during this environment.” Source: The Motley Fool

Bhusri gave an even more specific and bullish answer to this saying: “Our products are not choices. You have to have world-class HR, financial, and ERP systems to run your business. And so I think demand goes forward. And some companies will be cautious, and we just need to figure out where to spend our sales cycles.”

Fernandez added, “What we hear directly from them is that these transformation projects remain strategic, a priority and are going to happen. So that’s what’s keeping me confident.”

Enterprise Times: What does this mean

For some organisations, the operating loss may be a concern as the world approaches a recession. Assuming organisations do not defer projects, the healthy backlog provides confidence in the forecast. Like Salesforce, though, Workday has multi-year deals with organisations. The question is whether those organisations reduce user counts at renewal, which could decrease revenue. It depends upon how bad the recession is and how far unemployment rises before the impact is felt.

Workday continues to impress, though, and this was recognised by Gartner recently when it was named a leader in the inaugural 2022 Gartner Magic Quadrant for Cloud ERP for its Service-Centric Enterprises quadrant.


Please enter your comment!
Please enter your name here