Workday delivers strong Q4, ups subscription revenue outlook

The company said it is landing more customers for Workday Financial Management and large enterprises for its core HCM.

How the cloud landscape is shifting in 2019 Larry Dignan and Karen Forrest talk about the top cloud vendors for 2019 and some of the trends that are changing the landscape for buyers.

Workday's fourth quarter was strong as the company now counts half the Fortune 50 as customers. The company raised its subscription revenue outlook for fiscal 2020.

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The cloud financial and human resources company reported a fourth quarter net loss of 47 cents a share on revenue of $788.6 million, up 35.4 percent from a year ago. Non-GAAP earnings were 41 cents a share.  

Wall Street was expecting Workday to report fourth quarter non-GAAP earnings of 32 cents a share on revenue of $777.41 million.

For fiscal 2019, Workday reported revenue of $2.82 billion, up 31.7 percent from 2018, with a net loss of $1.93 a share. Non-GAAP earnings were $1.36 a share.

CEO Aneel Bhursri said that the fourth quarter closed strong. CFO Robynne Sisco noted:

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% to 28%.

Subscription revenue typically trails total revenue. For fiscal 2020, Wall Street is expecting Workday to deliver revenue of $3.53 billion.

Workday said it has added more Workday Financial Management customers including Banner Health and Ryder Truck. Larger companies such as Caterpillar and Wyndham Destinations have selected Workday HCM.

On a conference call, Bhusri elaborated on the customer uptake for HCM and Financials.

Q4 was our best quarter ever for our Financial Management product line. In the fourth quarter, we added 79 core Financial Management customers, including 4 new Fortune 500 customers, 2 of which were net new customers and 2 of which who were existing customers that added on financials.

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. This is a new development and something we view as a positive indication of the growing awareness of our Financial Management applications. In addition to the strong growth from our core Financial Management Suite, we saw strong momentum in our second full quarter of selling the Adaptive Insights Business Planning Cloud. was an excellent quarter for execution within the core Adaptive Insights business with over 200 new Planning customers for stand-alone offering.

Analysts asked Bhusri about reports about Workday getting to a $4 billion revenue target. Bhusri said that Workday will be north of $3 billion in annual revenue this year, but wouldn't project beyond that time frame.

Other key items worth noting from the conference call included:

SAP's move to migrate customers to HANA and Oracle competition. Bhusri said:

A lot of the HANA customers that they're pushing towards our using financials as part of distribution manufacturing, and that's not really part of the sector we're targeting. I think overall, the cloud momentum that started with Salesforce and the world of CRM then moved to HR with Workday and Service Now with IT is now coming to finance. And so when you look at the viable finance products in the cloud, it's actually a pretty short list. So as people are looking to transform their finance operations and as part of that move to the cloud and frankly tends to be much more about us and Oracle. And SAP doesn't really have a native cloud story so they really don't factor into the conversation as much. And I think what they're doing with HANA is kind of where we are since it's really affecting their manufacturing base of the finance side and we're not really targeting that.

And the broader economy, Bhusri had a long riff on the puts and takes worth noting:

I was at a conference and one of our large financial services customers talked about their view of the economy, the global economy, and I tend to really resonate with his point of view. He broke it into 3 buckets: businesses, consumers and then government. Generally, businesses and CEOs have a positive outlook on their businesses and on the environment. The global economy continues to move forward in a nice pace. The general global consumer spending money and generally in a positive frame of mind. The wildcard is government and I don't think this is an environment that many of us really know how to predict. Government has become unpredictable across many parts of the world, and we don't yet know how that's going to impact business or maybe it fades away. But that's the way where I think it wait and see mode to wait to see will any of the government -- the government question marks out there actually have an impact in the pipeline. But businesses are still focused on digitization. Consumers are still spending money. It's really the question are these trade wars. Some of the other macro environmental things coming out of government impact our pipeline, and I think we're in wait and see mode view rather than having any view right now. Right now, I would say we probably haven't seen it yet, but we're watching it very carefully.

The company is looking to expand its base in part by putting its software on Amazon Web Services and opening its ecosystem to third parties.

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