Workday Inc (NASDAQ: WDAY) stock surged over 12.2% in the pre-market session of August 28^th, 2020 (Source: Google finance) post solid second quarter of 2021 update and raised outlook. The firm’s Subscription revenue rose 23% yoy to $932 million, boosted by solid renewals, favorable new business linearity and a onetime benefit of $6 million from the acceleration of revenue on a customer contract. Subscription revenue backlog rose 22% yoy to $8.60 billion on solid new ACV bookings across both net new and add-on business. Workday HCM showed solid performance driven by migration to the cloud continues with notable customer additions, including Air Liquide, IB, the State of Oklahoma and Thyssenkrupp.

Another contributing factor is strong renewals with gross retention over 95% and net retention, which includes upsells at the time of renewal, over 100%. Subscription revenue backlog rose 21% yoy to $5.78 billion. Non-GAAP operating margin reached 24% boosted by top line, slower hiring; ongoing COVID-related moderation of operating expenses, including travel and marketing. The operating cash flow rose 57% yoy to $157 million, boosted by solid collections and moderated spending.

The firm added nine new global 2,000 HCM customers and two Global 2000 FINS deals and saw education and government team win of the state of Oklahoma. Medium enterprise performance was also solid with the back-to-base team showing 50% rise again this quarter, boosted by strength across products, including FINS, workforce and financial planning, Prism Analytics, learning, Scout RFP and newly launched Accounting Center.

The firm also raised fiscal year of 2021 guidance, with subscription revenue expected to be in the range of $3.73 billion to $3.74 billion, which is 20% to 21% growth. Subscription revenue is forecasted to be in the range of $948 million to $950 million, 19% growth during the third quarter of 2021. Subscription revenue backlog is expected to be in the high teens while non-GAAP operating margin is forecasted to be over 19%.