What will the future hold for Workday? ($WDAY)

Workaday provides enterprise cloud applications to customers worldwide. Workday offers a suite of financial and human capital management applications to simplify a variety of operational activities. Workday uses analytics, insights, and reporting in conjunction with machine learning to deliver efficient results in real-time. Workday saw a 15.9% increase in revenue and a 19.8% increase in subscription revenue in Q4 2020. This increase in revenue is favourable for the company and gives investors hope of profitability in the years to come. Workday has completed 15 strategic acquisitions since their founding in 2005. Recently, Workday acquired Peakon APS, a leader in the employee engagement space, which has grown rapidly due to the remote work environments caused by the pandemic. Peakon specializes in machine-learning and can benefit Workday by improving upon their current applications and insights. From 2015-2020 Workday quadrupled their customer market share (from 2% to 8%). Additionally, Workday has increased their Financial intelligence System enterprise customer base from 10 clients with $5B+ annual revenue (2015) to 40 clients with $5B+ annual revenue (2020). Serving these large companies (listed below) helps to strengthen Workday’s reputation and validate the quality of their applications. Lastly, since going public in 2012, Workday has accumulated a 97% Customer satisfaction rate. Historically, Workday’s Total Addressable Market (TAM) has an 8.7% CAGR, and some analysts are expecting their TAM to grow upwards of 40% in the next 2 years. This rapid industry growth can greatly benefit Workday especially if their customer share continues to grow during this time frame. Workday’s Plans: Position for Global growth Workday has had success in Western Europe, Oceania, and North America. Workday recognizes their opportunities in emerging markets (Germany, Japan, and France), and they plan to target Medium Sized Enterprises in these regions for continuous growth. Drive Financial Intelligence Systems momentum through Vertical Investment. Workday has been successful in previous vertical investments. Workday is expanding investments in key verticals (Financial and Professional Service) Workday has plans for future vertical investments (Tech and Retail). Expanding their footprint within the customer base Workday has managed to garner a 100% net Retention Rate, with 45% of their customers making add-on purchases on top of their existing deals. By having a high retention rate, Workday is expecting to see more recurring deals, which will drive steady revenue streams. Additionally, this retention rate may help them acquire potential clients in the future due to Workday’s reputable products. Subscription Revenue Between 2013 and 2020 Workday experienced a 49% CAGR in their Subscription revenue. This increase took subscription revenues from $190M (in 2013) to $3.07B (in 2020). This subscription revenue growth rate has slowed in recent years but remains at 28% YoY from 2019-2020. Approaching Target Margins Operating Cash Flow has a 51% CAGR, this rapid growth is healthy for Workday and will help them receive funding if needed in the future. Workday has been consistently growing their margins and expect their long-term non-GAAP margins to be 25%, which is an improvement from their current 12.3% margins. Increasing their margins over the long run will improve Workdays EPS and help them find a path to profitability in the future. Potential Catalysts: News about new clients using Workday’s services. Existing Customers signing new deals. Future Acquisitions of similar companies that will boost synergy.

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jacksondalton18

Apr 22, 2021

7.08%

Change % Since Posting

252.95

Price When Posted

17.91

Change Since Posting

WDAY

Workday Inc - Class A

270.86

1.01
0.37%
Current Price

What will the future hold for Workday? ($WDAY)

bullish

Workaday provides enterprise cloud applications to customers worldwide. Workday offers a suite of financial and human capital management applications to simplify a variety of operational activities. Workday uses analytics, insights, and reporting in conjunction with machine learning to deliver efficient results in real-time.

Workday saw a 15.9% increase in revenue and a 19.8% increase in subscription revenue in Q4 2020. This increase in revenue is favourable for the company and gives investors hope of profitability in the years to come.

Workday has completed 15 strategic acquisitions since their founding in 2005. Recently, Workday acquired Peakon APS, a leader in the employee engagement space, which has grown rapidly due to the remote work environments caused by the pandemic. Peakon specializes in machine-learning and can benefit Workday by improving upon their current applications and insights.

From 2015-2020 Workday quadrupled their customer market share (from 2% to 8%). Additionally, Workday has increased their Financial intelligence System enterprise customer base from 10 clients with $5B+ annual revenue (2015) to 40 clients with $5B+ annual revenue (2020). Serving these large companies (listed below) helps to strengthen Workday’s reputation and validate the quality of their applications. Lastly, since going public in 2012, Workday has accumulated a 97% Customer satisfaction rate.

Historically, Workday’s Total Addressable Market (TAM) has an 8.7% CAGR, and some analysts are expecting their TAM to grow upwards of 40% in the next 2 years. This rapid industry growth can greatly benefit Workday especially if their customer share continues to grow during this time frame.

 

Workday’s Plans:

  • Position for Global growth
    • Workday has had success in Western Europe, Oceania, and North America.
    • Workday recognizes their opportunities in emerging markets (Germany, Japan, and France), and they plan to target Medium Sized Enterprises in these regions for continuous growth.
  • Drive Financial Intelligence Systems momentum through Vertical Investment.
    • Workday has been successful in previous vertical investments.
    • Workday is expanding investments in key verticals (Financial and Professional Service)
    • Workday has plans for future vertical investments (Tech and Retail).
  • Expanding their footprint within the customer base
    • Workday has managed to garner a 100% net Retention Rate, with 45% of their customers making add-on purchases on top of their existing deals.
    • By having a high retention rate, Workday is expecting to see more recurring deals, which will drive steady revenue streams. Additionally, this retention rate may help them acquire potential clients in the future due to Workday’s reputable products.
  • Subscription Revenue
    • Between 2013 and 2020 Workday experienced a 49% CAGR in their Subscription revenue. This increase took subscription revenues from $190M (in 2013) to $3.07B (in 2020).
    • This subscription revenue growth rate has slowed in recent years but remains at 28% YoY from 2019-2020.
  • Approaching Target Margins
    • Operating Cash Flow has a 51% CAGR, this rapid growth is healthy for Workday and will help them receive funding if needed in the future.
    • Workday has been consistently growing their margins and expect their long-term non-GAAP margins to be 25%, which is an improvement from their current 12.3% margins. Increasing their margins over the long run will improve Workdays EPS and help them find a path to profitability in the future.

Potential Catalysts:

  • News about new clients using Workday’s services.
  • Existing Customers signing new deals.
  • Future Acquisitions of similar companies that will boost synergy.
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read-time
3 min

330.00

Target Price

6/ 10

Confidence

3+ Years

Timeframe
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