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Workday (WDAY) Q1 Earnings Beat Estimates on Solid Revenues

Workday Inc. WDAY reported solid first-quarter fiscal 2024 results, with the bottom and the top line beating the Zacks Consensus Estimate. The company is currently emphasizing on innovation and integrating artificial intelligence and machine learning capabilities into its solutions. Despite macroeconomic challenges, the company experienced positive demand trends for its human capital management and financial management solutions. This can be attributed to a strong product portfolio, which resulted in higher year-over-year revenues.

Net Income

On a GAAP basis, net income in the reported quarter was $0.136 million or a break-even earning pr share against a net loss of $102.1 million or 41 cents per share in the prior-year quarter. The year-over-year improvement is primarily driven by net sales growth.

Non-GAAP net income rose to $342.3 million or $1.31 per share from $217.4 million or 83 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 20 cents.

Workday, Inc. Price, Consensus and EPS Surprise

 

Workday, Inc. price-consensus-eps-surprise-chart | Workday, Inc. Quote

 

Revenues

In the first quarter, Workday registered revenues of $1,684.3 million, up from $1,434.7 million reported in the year-ago quarter. Workday is witnessing solid traction in its core verticals. Strong customer engagement in the financial management and Human Capital Management (HCM) sectors has positively impacted the company's revenue. There is an increasing emphasis on integrating AI and ML capabilities into its solutions. Furthermore, the company has introduced Workday Peakon Employee Voice, a feature supported by AI, with semantic search functionality for improved analysis of employee feedback. In the first quarter, Peakon received over 500 million survey responses, indicating the growing acceptance of Workday products. These developments have enhanced the company's business prospects and contributed to its revenue growth. The top line surpassed the Zacks Consensus Estimate of $1,668 million.

Subscription services revenues amounted to $1,527.9 million, up 20.1% from $1,272.1 million reported in the year-ago quarter. At end of the quarter, 24-month subscription revenue backlog increased by 23% to $9.79 billion, driven by new ACV bookings and contract renewals. Revenues from Professional services were $156.4 million compared with $162.6 million in the prior-year quarter.

Other Details

Operating loss during the quarter was $19.8 million compared with an operating loss of $72.8 million in the prior-year quarter. Non-GAAP operating income was $395.9 million for an operating margin of 23.5% compared with respective tallies of $288.6 million and 20.1% in the year-earlier quarter.

Cash Flow & Liquidity

During first quarter fiscal 2024, WDAY generated $ 277.3 million of cash from operating activities compared with $ 439.7 million in the prior-year quarter. As of Apr 30, 2023, the company had cash and cash equivalents and marketable securities of $6.33 billion with long-term debt of $2,976.9 million.

Outlook

For fiscal 2024, Subscription revenues were projected in the band of $6,550-$6,575 million, indicating growth of 18% year over year. Management upgraded the lower end of their guidance from $6,525 billion to $6.550 billion as it expects the positive momentum to persist in the upcoming quarters. Professional services revenues are expected in the range of $630-$650 million. The non-GAAP operating margin is projected to be 23%. Capital expenditure is approximated around $300 million.

For the second quarter of fiscal 2024, management upgraded their Subscription revenues expectation to $1.611-$1.613 billion from $1,517-$1,520 million. Revenues from Professional service are estimated at $160 million. For the second quarter, the non-GAAP operating margin is approximated at 22%.

Zacks Rank & Stocks to Consider

Workday currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

InterDigital, Inc. IDCC, sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.

It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.

Akamai Technologies, Inc. AKAM, sporting a Zacks Rank #1, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.

It is a global provider of content delivery network (CDN) and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.

Meta Platforms Inc. META, sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.

Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.

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