Enterprise software company Workday reported better-than-expected quarterly earnings, although costs related to its acquisition of Adaptive Insights weighed on margins.
Workday’s second-quarter report was its first since it bought Adaptive Insights, which provides cloud software for business planning, for $1.5 billion — its largest-ever acquisition.
The company lost $86.2 million, or 40 cents a share, compared with a loss of $82.5 million, or 40 cents a share, in the year-ago period. Adjusted earnings were 31 cents a share, beating analysts’ estimates of 26 cents.
Revenue rose 27.9% to $671.7 million versus estimates of $662.8 million, with subscriptions to Workday’s cloud services for human resources, finance and other business functions increasing 30.2% to $565.7 million.
“Q2 was another strong quarter. We once again increased the number of both finance and HR customers in the Fortune 500 and made significant progress on our acquisition of Adaptive Insights to further enable customers to plan, execute, and analyze all in one system,” CEO Aneel Bhusri said in a news release.
Workday expects revenue from Adaptive to be accretive to the tune of $42 million during the remainder of the year with $18 million coming in the next quarter.
But operating margin in the second quarter fell to 9.3% from 10.1% and Workday forecasts a 300 basis point decline in margin for the full fiscal year due to the Adaptive deal. “Approximately $40 million of this headwind comes from onetime transaction and integration cost with the remaining coming from ongoing operations,” CFO Robynne Sisco said.
Bhusri said the combination of Workday and Adaptive “will enable customers to better plan, execute, and analyze across the enterprise all in one system, the leading cloud platform, to drive their financial and business transformations.”
“We’re committed to unifying Adaptive Insights with Workday, not bolting it on,” he told analysts in an earnings call.
For the full 2019 fiscal year, Workday expects to hit $2.765 billion to $2.772 billion in revenue, topping the $2.704 billion FactSet consensus. The full-year estimate includes the contribution from Adaptive Insights.