NASDAQ:WDAY Workday Stock - Strong Q2 23 Financial Results

Workday, Inc. Reveals Impressive Financial Metrics Amidst Growing Subscription Revenues

Financial Overview - Q2 2023: NASDAQ:WDAY

Workday, Inc., known under the ticker NASDAQ:WDAY, demonstrated a robust financial position in its recent quarterly report. The company posted total revenues of $1.79 billion, marking a notable 16.3% YoY growth. A closer look reveals that the subscription revenues contributed significantly, reaching $1.62 billion, a commendable 18.8% YoY increase.

The company also transitioned into a favorable operating income position, noting $36.3 million, compared to the $34.1 million loss observed in the same quarter the previous year. When it comes to net income per share, basic and diluted figures stood at $0.30, a remarkable turnaround from the $0.25 net loss per share observed in Q2 of fiscal 2023.

Reinforcing its strong financial standing, the company reported cash, cash equivalents, and marketable securities totaling a whopping $6.66 billion as of July 31, 2023.

Current Trading Status: NASDAQ:WDAY

The real-time stock performance of Workday, Inc. can be viewed here. The stock is currently trading at $248.02, up by 1.44% from its previous close at $244.50. A look at the company's 52-week trading range shows a commendable increase, from a low of $128.72 to its current high of $248.11. The company enjoys a substantial market capitalization of $64.976 billion and exhibits a 5-year monthly beta of 1.26, indicating its volatility relative to the market.

Valuation and Trading Information: NASDAQ:WDAY

Workday's valuation metrics reveal an enterprise value of $60.67 billion. It's worth noting the company's price-to-sales (ttm) ratio stands at 9.46, and its Enterprise Value/EBITDA is at 141.90.

In the trading realm, Workday has experienced a 54.22% change in its stock price over the past 52 weeks, significantly outperforming the S&P 500's 52-week change of 14.87%. The company's average trading volume over three months has been 1.86 million, with an even more robust 10-day average volume of 2.2 million.

Share Statistics and Short Interest: NASDAQ:WDAY

Currently, there are 207 million shares outstanding, with an implied figure of 262 million. The company has a float of 205.42 million shares. In terms of ownership, institutions hold a dominant position with 91.51% of shares, while insiders hold a minimal 1.00%.

Short interest data reveals that as of August 14, 2023, there were 3.66 million shares shorted, representing 1.79% of the float. This is a decrease from the previous month, where the short interest was 4.22 million shares.

Financial Highlights and Profitability: NASDAQ:WDAY

The fiscal year for Workday ends on January 30, with the most recent quarter ending on July 30, 2023. A glance at the company's profitability metrics shows a profit margin of -1.81% and an operating margin (ttm) of -1.47%. In terms of management effectiveness, the return on assets stands at -0.46%, and the return on equity is at -2.13%.

Workday's revenue for the trailing twelve months was $6.72 billion, with a gross profit of $4.5 billion. The company reported a net loss of $121.62 million, translating to a diluted EPS of -$0.49.

Earnings Forecast: NASDAQ:WDAY

Earnings estimates for the upcoming quarters indicate a positive outlook for Workday. Analyst consensus for the current quarter (October 2023) is an EPS of 1.4, which is a significant increase from the 0.99 EPS reported a year ago. Revenue estimates for the same period are set at $1.85 billion, suggesting a growth potential of 16.10% YoY. The upcoming fiscal year (2024) shows promising revenue growth expectations of 16.30%, translating to a projected revenue of $7.23 billion.

Financial Highlights: NASDAQ:WDAY

Peering into the subsequent quarter (January 2024), analysts forecast an EPS of 1.44 and revenue expectations of $1.91 billion, marking a prospective year-over-year growth of 16.10%. Zooming out to consider the broader picture, revenue for the entire 2024 fiscal year is anticipated to touch $7.23 billion, reflecting a solid growth rate of 16.30%. Projections for 2025 are even more optimistic, with analysts estimating revenues to soar to $8.46 billion, a commendable growth rate of 17.00% from the previous year.

Surpassing Expectations: NASDAQ:WDAY

Workday has a history of surpassing analyst expectations. Delving into the earnings history, for the quarter ending October 30, 2022, the EPS estimate was 0.84, but Workday delivered a higher EPS of 0.99. This pattern continued in the subsequent quarters. For instance, in the quarter ending July 30, 2023, the estimated EPS was 1.26, while the actual reported EPS was 1.43. These positive surprises ranged from 8.80% to 17.90%.

Trends in Earnings Estimates: NASDAQ:WDAY

Over the past 90 days, there's been a noticeable positive revision in Workday's earnings estimates. Just seven days ago, the EPS estimate for the current quarter (October 2023) was 1.34, which has since been revised upward to 1.4. This trend of upward revision is also evident for the next quarter (January 2024), with estimates moving from 1.41 to 1.44 in the same seven-day period. Such revisions offer insights into the growing confidence analysts have in the company's performance.

EPS Revisions and Growth Projections: NASDAQ:WDAY

The last seven days saw 19 upward revisions for the current quarter's EPS and 14 for the next quarter. This contrasts with a minimal number of downward revisions in the last 30 days. On a larger scale, when we assess Workday's growth projections, the current year's expected growth stands at an impressive 53.00%. Forecasts for the next year (2025) indicate a growth of 18.70%. These figures affirm Workday's potential in maintaining its upward trajectory in the foreseeable future.

Comparative Growth Analysis: NASDAQ:WDAY

For a broader perspective, Workday's projected growth for the next five years per annum is estimated at 30.69%. To put this in context, the company has maintained an annual growth rate of 31.35% over the past five years. While these projections don't match the exact past growth rates, they certainly underline Workday's sustained expansion potential.

The Bigger Picture

Workday's financial health can be further discerned from their balance sheet. With a total cash reserve of $6.66 billion, translating to $25.41 per share, they are in a strong liquidity position. However, the company also holds a total debt of $3.27 billion, with a debt-to-equity ratio of 52.10%. But a current ratio of 2.00 offers reassurance of the company's ability to meet its short-term obligations.

Cash Flow Indicators: NASDAQ:WDAY

A keen look at cash flow statements reveals that Workday's operating cash flow over the trailing twelve months stands at $1.81 billion. When factoring in financial obligations, the levered free cash flow is slightly lower at $1.78 billion. Both figures accentuate the company's effective cash management strategies.

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Workday Inc. (NASDAQ:WDAY): A Deep Dive into Q2 Financial Performance and Growth

A Brief Introduction to Workday Inc.

Workday Inc., an Application Software giant, delivers cloud-based Enterprise Resource Planning [ERP], Human Capital Management [HCM], Financial Management, and Student Information System platforms to a diverse range of businesses. The company's inception in 2005 stemmed from the innovative spirit of its founder, David Duffield, also the genius behind the highly successful CRM software, PeopleSoft. In less than a decade, in 2012, Workday made its mark on the public platform. Catering to a variety of organizations, its rich history and its wide reach, serving 50% of the Fortune 500, makes Workday a significant player in the industry.

Rising Expectations in the Market

Throughout the year, anticipations regarding the non-GAAP EPS for Q2 2024 have steadily climbed, with projections surging from $1.15 to $1.26. This shift implies the market's anticipation of Workday transitioning from a revenue-driven start-up to a more mature, scalable business. Evidence of this is clear: 23 of the 27 EPS revisions lean positive, while only 17 of 26 revenue revisions reflect an upward trend.

Performance Predictions: A Closer Look

Historically, in the previous 12 quarters, Workday exceeded EPS estimates 11 times and revenue estimates 12 times. Such a consistent track record might suggest predictability, a sign of the company's maturation. Given this, predictions lean towards a modest beat on both EPS and revenue for the upcoming earnings release.

GAAP Profitability and Implications

A potential GAAP EPS of 1 cent is anticipated for Q2. Achieving this would mark a significant milestone for Workday, marking it as only the third GAAP profitable quarter for the company. This move towards profitability might be seen positively, but it also raises questions regarding Workday's organic revenue growth potential. Observers anticipate that Workday will continue on this trend towards GAAP profitability this fiscal year.

Moreover, Workday's projection of just a 22% Non-GAAP operating margin is worth monitoring as revenue growth is projected to be more modest, emphasizing the importance of margin.

Valuation Concerns and Stock Dynamics

Heading into earnings, several signs suggest the stock might be overvalued:

• Workday's stock price is approximately 40 times its full-year revenue for 2023, which stands at $1.65 billion.
• The stock has risen roughly 40% YTD, mostly remaining below the $250 mark.

Technical Strength and Market Movement

Workday's stock performance has been commendable, surging past common moving averages, backed by the recent tech rally's momentum. Even if earnings fall short of expectations, the stock is likely to find support around the low $200s. Conversely, positive earnings or guidance can propel the stock even higher.

Competitive Landscape in the HCM Space

The HCM domain is fierce, with numerous competitors vying for dominance. Workday's unique positioning, serving a significant chunk of the Fortune 500 while operating in a rapidly expanding market, is notable. But it's also essential to recognize the challenges posed by established players like Oracle and SAP, as well as emerging contenders like Paycor and Paycom Software, Inc.

AI Integration and Future Outlook

Workday stands out by integrating AI and machine learning at its core, optimizing efficiencies, and facilitating faster, data-driven decisions for its clients. This forward-thinking approach augments Workday's robustness in the market.

Recent Performance Highlights

In its latest fiscal Q2 report for 2024 ending on July 31, 2023, Workday showcased:

• Total Revenues: $1.79 billion, a 16.3% YoY increase.
• Subscription Revenues: $1.62 billion, marking an 18.8% YoY growth.
• Operating Income: $36.3 million, contrasting the $34.1 million loss from the same period last year.
• Net Income Per Share: Basic and diluted net income stood at $0.30, a significant rise from the $0.25 net loss per share in fiscal 2023's Q2.

Workday Financial Performance Overview

Workday, a company that has been the talk of the town in financial circles, recently released its earnings, giving investors and stakeholders a clearer picture of its financial health. The financial figures for Workday, identified by its NASDAQ symbol NASDAQ:WDAY, for the recent quarter have shown promising growth in several areas. Let's delve into the specifics:

Solid Revenue Growth

Total revenues have come in at a remarkable $1.79 billion, showcasing a growth of 16.3% YoY. Such growth in a dynamic market environment speaks volumes about the company's resilience and adaptability.

Subscription Revenues Take the Lead

In today's digital age, subscription-based models are the name of the game. Workday seems to have capitalized on this trend effectively. The company reported subscription revenues of $1.62 billion, registering an impressive 18.8% YoY growth. This figure not only emphasizes the company's ability to attract new customers but also to retain and expand its existing customer base.

Turning the Operating Tide

Looking at the operating income, there's a significant reversal from the previous year. The company reported an operating income of $36.3 million. This is a stark contrast from the $34.1 million loss reported during the same period last year. Such a turnaround within a year indicates effective cost management strategies and an efficient operational structure in place.

Net Income Per Share Shows Resilience

Shareholders have another reason to be optimistic. The basic and diluted net income per share stood at $0.30. This is a commendable upswing when compared to the $0.25 net loss per share in fiscal 2023's Q2. This data suggests that not only has the company been able to increase its profitability, but it has also efficiently managed its share capital.

Sturdy Cash Position

Financial stability can often be gauged by looking at a company's cash position. As of July 31, 2023, Workday had cash, cash equivalents, and marketable securities amounting to a whopping $6.66 billion. Such a robust cash position provides the company with a significant cushion to weather potential economic downturns, make strategic acquisitions, or invest in R&D for future growth.

Workday, Inc. (NASDAQ:WDAY) Financial Summary , EPS , Stock and Forecast

Workday, Inc.'s Q2 2023 financials show strong revenue growth, with revenues surging to $1.79 billion, a significant 16.3% YoY increase. This robust performance is primarily driven by a striking 18.8% YoY jump in subscription revenues, reaching $1.62 billion. Notably, the company transitioned from an operating income loss of $34.1 million in the prior year to a positive $36.3 million, demonstrating a remarkable turnaround. This financial stability is further evidenced by an EPS of $0.30, recovering from the previous year's net loss per share of $0.25.

By the close of July 2023, Workday's liquidity position appears solid with assets totaling $6.66 billion. The stock has exhibited substantial growth, currently priced at $248.02, representing a 1.44% increase from its last closing. This rise is consistent with its year-long performance, seeing the stock price move from a low of $128.72 to a high of $248.11. Given an impressive market cap of $64.976 billion and its relative volatility with a 5-year monthly beta of 1.26, it offers an intriguing option for potential investors.

Key valuation metrics further enhance the company's appeal, with an enterprise value of $60.67 billion and a price-to-sales ratio at 9.46. Even more compelling is the stock's 54.22% surge over the past year, substantially outperforming the S&P 500's 14.87% growth.

Institutional confidence in Workday remains high, holding 91.51% of its 207 million outstanding shares. Additionally, a reduction in short interest from 4.22 million to 3.66 million shares as of August 14, 2023, signifies a decreased bearish outlook among traders.

However, the profitability metrics present challenges. A -1.81% profit margin and a -1.47% operating margin (ttm) indicate areas of concern. Additionally, both return on assets and equity are in the negatives, at -0.46% and -2.13%, respectively.

Yet, future earnings forecasts for Workday are optimistic. Analysts predict an EPS of 1.4 for October 2023, a considerable rise from the previous year's 0.99. Revenue growth is anticipated to continue its upward trajectory, with projections of $7.23 billion for the fiscal year 2024, marking a 16.30% growth. For January 2024, expectations include an EPS of 1.44 and revenues of $1.91 billion, signifying a 16.10% YoY growth. By 2025, revenues might soar to an impressive $8.46 billion, a 17.00% YoY growth.

Workday's consistent overperformance against analyst predictions reinforces its strong market position. Recent upward revisions in EPS estimates and the expected growth of 53.00% for the current year, followed by 18.70% for the next, reflects increasing analyst confidence in the company.

For the next five years, a projected annual growth rate of 30.69% closely matches its past five-year growth rate of 31.35%, hinting at sustained growth.

Despite holding significant debts of $3.27 billion and a debt-to-equity ratio of 52.10%, a current ratio of 2.00 indicates Workday's capability to handle its short-term obligations.

The cash flow narrative remains positive. An operating cash flow of $1.81 billion and a levered free cash flow of $1.78 billion in the trailing twelve months underline effective cash management.

Investment Recommendation

Given the data, Workday, Inc. exhibits financial resilience, growth, and efficient cash management. The outlook for NASDAQ:WDAY is predominantly bullish. It aligns as a "buy" option, particularly for those valuing solid cash flow metrics. However, a comprehensive analysis, factoring in the broader industry trends and potential risks, is essential before committing.
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