Workday Posts Strong Q4 From Digital Transformation Trends; Shares Fairly Valued

Wide-moat Workday posted strong fourth-quarter results, with revenue beating both our and FactSet expectations and adjusted EPS falling in line with our expectations. Workday continued to recognize broad-based growth stemming from the sustained digital transformation by enterprises. Workday continues to achieve wins within its flagship human capital management vertical, now servicing over 70% of the financial services firms within the Fortune 500. With an increased customer landscape, it is paramount for Workday to gain clients and retain existing ones. In the quarter, Workday had growth re-acceleration and a net retention rate of over 100%. Workday continues to invest in its employee base by adding 1,000 employees in the fourth quarter bringing its employee total to over 15,200, up 21% year over year. Displaying its commitment to invest in employees, Workday has initiated a companywide performance-based cash bonus program, which we think will enable it to keep up its best-of-breed offerings, as we expect the headcount growth to lead to Workday's expansion further into the ERP portfolio.