Workday subscription revenue forecasts leave investors cold, wiping 9% off company value

SaaSy vendor takes comfort in contingent workforce software acquisition

Workday has swallowed vendor management SaaS type VNDLY for over half a billion dollars, just as 9 per cent of the company's value was wiped off after moderately positive financial results failed to impress investors.

The US-based business application company, which specialises in finance and HR, posted calendar third-quarter revenues of $1.33bn, up 20 per cent from the same quarter last year. Subscription revenue was $1.17bn, an increase of 21 per cent over the same period.

Meanwhile, it turned in an operating income of $23.9m, a turnaround from last year's third-quarter operating loss of $14.1m.

But it was the forecasts that troubled investors. Robynne Sisco, co-president and chief financial officer, said fourth-quarter subscription revenue would hit $1.216bn to $1.218bn, representing growth of 21 per cent. Although the subscription growth was set to be in line with analysts' estimates, the figure was the same as the third quarter, rather than climbing at the rate some investors were anticipating.

They voted with their wallets and Workday shed nearly a tenth of its value in extended trading, according to Bloomberg.

The company might take some comfort in its new acquisition. Following hot on the heels of the purchase of pricing engine and guided selling firm Zimit, Workday has dug deep to find a reported $510m in cash to buy a maker of cloud-based external workforce and vendor management software. Among vendors which can be accurately described as unpronounceable, VNDLY will help Workday provide a "unified workforce optimisation solution" covering contingent as well as FTE workforce.

Angela Eager, research director at TechMarketView, said the two companies already worked together and the acquisition would help Workday achieve its goal of providing an integrated approach to manage all types of workers: internal and external workforce, salaried, hourly, contingent, and outsourced.

"Through a unified system of record, Workday and VNDLY aim to provide an end-to-end process for requisitions, statements of work, onboarding, invoicing and payroll," she said.

Despite the investor sentiment, Workday's financial performance has been strong. In its last full-year financials, subscription revenue was growing at nearly 20 per cent year on year and in the latest quarterly results operating income turned positive.

Yet it has not had a smooth ride in the last year. In July, it was revealed that Amazon had pulled the plug on most of its worldwide Workday project amid reports of difficulty scaling the system, which Workday itself denied. Meanwhile, the US state of Maine has also hit difficulties with its Workday project. ®

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