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Workday’s Professional Services Unit’s Performance Trend

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May. 9 2018, Updated 9:30 a.m. ET

How is WDAY’s Professional Service segment contributing to the business?

Workday (WDAY) maintains strong growth in its Professional Services segment business, buoyed by large contract wins and huge demand for its enterprise cloud application services.

The company’s Professional Services segment provides support to its clients in terms of completing billable project lifecycle, inclusive of project and resource management, time and expense tracking, and project billing. It also includes revenue recognition, financial reporting, and analytics within a single, unified solution. Workday’s clients in this segment include Netflix (NFLX) and Aon (AON).

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In the last five quarters, Workday’s Professional Services revenues grew at a CAGR (compound annual growth rate) of 6.0%. From the graph above, we can see the company’s Professional Services unit revenue growth. It maintained an increasing trend during the period, driven by the growth in premium customer size.

Business performance and company guidance

In fiscal 2018, Workday’s Professional Services revenues came in at ~$355.5 million compared with $285.0 million in fiscal 2017. Likewise, the segmental revenues in fiscal 4Q18 increased 27.0% YoY (year-over-year) to $92.5 million.

Workday projects professional services revenues of ~$93.0 million in fiscal 1Q19.[1. fiscal 1Q19 ended April 30, 2018] The company expects the business unit’s revenues for fiscal 2019 to reach ~$405.0 million, representing an annual increase of 14.0%–16.0%, respectively, compared with the previous year.

The company expects its professional services margins to be slightly lower in fiscal 2019 compared with 2018, driven by the higher investment in programs to support customer deployments.

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