Enterprise cloud applications provider for human resource and
Workday Inc. (
recently announced third quarter fiscal 2013 results. Workday
reported a loss of 49 cents per share in its first earnings
release post October 2012 Initial Public Offering ("IPO").
Loss per share (including stock-based compensation of 10
cents) was much narrower than the Zacks Consensus Estimate of a
loss of 56 cents per share and the year-ago quarter loss of 66
Revenue surged 99.2% year over year to $72.6 million, well
ahead of the Zacks Consensus Estimate of $64.0 million.
Subscription revenue soared 116.0% year over year to $52.0
million in the quarter. Services revenue increased 67% year over
year to $21.0 million.
The company added 31 new customers, ending the third quarter
with 356 customers in total. Most of the contracts signed during
the quarter were of three-and-a half to four years in duration.
Total unearned revenue at the quarter-end increased 64% from the
year-ago quarter to $252.0 million.
Gross profit jumped 126.0% year over year to $42.4 million.
Gross margin expanded 690 basis points ("bps") to 58.4% in the
Operating expenses rose sharply to $72.0 million from $38.0
million reported in the year-ago quarter, due to a massive 216.7%
increase in general & administrative expense, 79% jump in
sales & marketing and 71.1% rise in research &
As a result of higher operating expenses, Workday reported
operating loss of $29.6 million, wider than a loss of $19.4
million in the year-ago quarter. Net loss (excluding stock-based
compensation) was $41.5 million compared with $19.8 million in
the year-ago quarter.
Cash & cash equivalents were $797.4 million, up $675.0
million from the previous quarter, driven by net IPO proceeds of
$685.0 million. Workday issued 26.2 million shares in the IPO.
Cash outflow was $9.4 million in the third quarter.
For fourth quarter 2013, total revenue is expected to remain
within a range of $75.0 million to $79.0 million, reflecting
year-over-year growth of 74% to 83%. Subscription revenue is
expected to remain within a range of $56 million to $58 million,
reflecting year-over-year growth of 93% to 100%.
Management expects operating loss to increase in the fourth
quarter due to increasing headcount and professional fees and
increased sales compensation.
We believe that Workday's innovative product pipeline will
help it to gain significant footprint in the human resource and
financials market. Workday's upcoming Big Data Analytics
applications (expected in the second half of 2013) and Workday
Recruiting (first half of 2014) will further boost its customer
base going forward.
However, we believe that Workday will face serious competition
from large established players such as
Oracle Corp. (
SAP AG (
in both of its operational markets. This cut-throat competition
and increasing investments in product development and personnel
cost will hurt profitability going forward.
Thus, we remain Neutral on the shares over the long term (6-12
months). Currently, Workday has a Zacks #3 Rank, which implies a
Hold rating over the short term (3-6 months).
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