Yahoo Finance Why Is Workday (WDAY) Up 2.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Workday (WDAY). Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Workday due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Workday Q4 Earnings Beat Estimates, Revenues Up Y/Y
Workday reported strong fourth-quarter fiscal 2023 results, with the bottom and the top line beating the Zacks Consensus Estimate. Workday is experiencing solid growth as more businesses select its human capital management and financial solutions. The company's strategy to focus on innovation and cost control also facilitated top-line expansion year over year.
Bottom Line
Net loss in the reported quarter was $125.7 million or a loss of 49 cents per share compared with a net loss of $73.3 million or 29 cents per share in the prior-year quarter. Despite top-line growth, higher operating expenses led to a greater loss during the quarter.
Non-GAAP net income was $256.2 million or 99 cents per share compared with $206 million or $78 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 10 cents.
In fiscal 2023, the net loss was $366.7 million or a loss of $1.44 per share on a GAAP basis against a net income of $29.4 or 12 cents per share in fiscal 2022. Non-GAAP net income stood at $949.2 million or $3.64 per share compared with respective figures of $1,038.7 million or $3.99 per share in fiscal 2022.
Revenues
Total revenues in the quarter rose to $1,646.3 million from $1,376.1 million in the prior-year quarter. Expanding customer base backed by a robust portfolio of financial software and human capital solutions, a unique innovation approach based on AI and machine learning-based applications boosted the top line. In the fourth quarter, the company achieved the 10,000 customer mark. Of them, 4,750 customers were from the company's core human resource and financial software products portfolio. The top line surpassed the Zacks Consensus Estimate of $1,632 million.
Subscription services revenues stood at $1,495.4 million, up 21.7% from $1,229.2 million reported in the year-ago quarter, backed by strong renewals. Revenues from Professional services increased to $150.9 million from $147 million in the prior-year quarter.
For fiscal 2023, revenues were $6,215.8 million compared with $5,138.8 million in fiscal 2022.
Other Details
Operating loss during the quarter was $89 million compared with an operating loss of $101 million in the prior-year quarter. Non-GAAP operating income was $305.3 million for an operating margin of 18.5% compared with respective tallies of $237.1 million and 17.2% in the year-earlier quarter. Improvement was backed by revenue growth and continued cost discipline.
Cash Flow & Liquidity
During fiscal 2023, WDAY generated $ 1,657.2 million of cash from operating activities compared with $ 1,650.7 million in fiscal 2022. As of Jan 31, 2023, the company had cash and cash equivalents and marketable securities of $6,121.4 million with long-term debt of $2,975.9 million compared with respective tallies of $3,644.2 million and $617.4 million in the prior year.
Outlook
For fiscal 2024, Subscription revenues are currently projected to be in the band of $6,525-$6,575 million, indicating a growth 17-18% year over year. Professional services revenues are expected to be in the range of $630-$650 million. The non-GAAP operating margin is projected to be 23%.
For the first quarter of fiscal 2024, Subscription revenues are expected in the band of $1,517-$1,520 million, indicating growth of 19% year over year. Revenues from Professional service are estimated at $148 million. For the first quarter, the non-GAAP operating margin is approximated at 21.5%.
Management expects that short-run uncertainty will likely persist. In fiscal 2024, the company will continue to make investments in strategic growth areas and put an emphasis on innovation, including its AI and machine learning-based applications.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 5.71% due to these changes.
VGM Scores
At this time, Workday has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise Workday has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Workday, Inc. (WDAY) : Free Stock Analysis Report
