Workday beat expectations in Q3, remains loss-making

COVID-19 could slow customer wins, warns analyst

Cloud HR and finance application biz Workday is bouncing along happily amid a global pandemic as it outstripped market expectations and posted an 18 per cent annual increase in revenue for Q3 of its fiscal 2021.

Revenue crossed the line at $1.11bn for the three months ended 31 October, up 17.9 per cent year-on-year. Contained within this was $968m in subscription services, up 21 per cent, and a minor fall in professional services to $137.4m.

The company, which has built its business applications on an in-memory database, is still operating at loss. It was $14.1m in the red for the quarter, although that was a big improvement on the $110.3m loss from a year earlier.

Robynne Sisco, president and chief financial officer, said: "As we enter Q4, we are increasing our pace of investments to capitalise on the long-term opportunity that we see ahead."

Workday said it had achieved 190 "go-lives" of software with customers during the quarter, something which could help bolster the company as COVID-19 still threatens new customer acquisitions.

Angela Eager, research director with TechMarketView, said: "With the company hinting that the COVID-19 situation could impact net new customer wins, go-lives will be important in driving additional subscriptions from existing customers. We would expect demand for analytics, planning, spend management, and procurement."

In September, Workday signalled its ambition to expand its nascent presence in the market for procurement software. "We want to be best in class, best-in-breed in procurement. We're not there yet," CEO Aneel Bhusri said.

With its Q3 earnings, the company announced that its December 2019 acquisition of Scout RFP would now become Workday Strategic Sourcing, reflecting the company's "commitment to elevate and help transform the office of procurement". Renaming the product is unlikely to change the fact it faces stiff competition from incumbent procurement specialists including SAP Ariba, Tradeshift, Coupa, Basware, and GEP.

Such was the confidence in performance despite economic uncertainty, Workday has raised its revenue guidance for fiscal 2021 to a maximum of $3.775bn. In May, during the early stages of the pandemic, it had reduced subscription turnover forecasts for the year to between $3.67bn and $3.69bn. ®

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