Strong earnings beat sends Workday’s stock higher

Human resources software pioneer Workday Inc. beat expectations in its first quarter financial results today and hired a new chief financial officer, sending its stock higher in extended trading.

The company reported a net profit of $136,000 for the quarter, working out at less than a penny a share. Earnings before certain costs such as stock compensation came to $1.31 per share, while revenue rose 17% to $1.68 billion. They were decent results, with Wall Street analysts targeting earnings of just $1.12 per share on slightly lower sales of $1.67 billion.

Workday’s subscription revenue came to $1.53 billion in the quarter, up 20% from a year earlier. It also reported a 24-month subscription revenue backlog of $9.79 billion, up 22%. Subscription revenue is a key metric for Workday because most of its customers consume its products on an “as-a-service” basis. Investors liked what they saw, with Workday’s stock rising more than 7% in the after-hours trading session.

“Workday had a strong first quarter, underscoring the value proposition of the full Workday platform combined with our unique approach to artificial intelligence and machine learning,” said Workday’s co-chief executive Aneel Bhusri (pictured).

Workday is a market leader in human resource software. It sells cloud-based software as a service that covers areas such as human capital management, financial management and enterprise resource planning. Using its software, enterprises can automate human resource management and business tasks such as payroll and expenses, while tracking and managing employee data.

Carl Eschenbach, Workday’s other co-CEO who joined the company late last year, said the company’s strong momentum shows that many customers rely on Workday as an intelligent digital backbone that supports their most critical assets. “”As we look ahead, we will continue to innovate even faster, take an industry-first approach, and maintain a vibrant and engaged partner ecosystem,” he said.

In a statement, Workday’s outgoing CFO Barbara Larson said the company sees second quarter subscription revenue of between $1.611 billion to $1.613 billion, representing 18% growth at the midpoint. The forecast slightly exceeded analyst’s forecast of $1.61 billion. Workday also raised its full year subscription revenue outlook, saying it’s now targeting a range of $6.550 billion to $6.575 billion

In a separate announcement, Workday said Larson will step down from her role, to be replaced by former VMware Inc. CFO Zane Rowe. The appointment will be effective from June 12, Workday said. Rowe is a veteran executive with more than two decades’ experience in senior roles, having previously served long stints as the CFO of EMC Corp. and United Airlines Inc. He also briefly the post of interim CEO at VMware from February 2021 to May 2021, and earlier in his career led North America sales for Apple Inc.

Photo: Intel Capital/Flickr