Workday 2013/14 revs up 71 percent, forecast $710-740 for fiscal 2015

Profile picture for user gonzodaddy By Den Howlett February 26, 2014
Summary:
Workday continues to shine with fiscal 2014 revenue getting close to $500 million. The forward forecast while suggesting a slowing down in growth is still impressive

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Workday closed out fiscal 2014 with revenue of $468.9 million, up 71 percent for the whole year. Looking forward, it is forecasting revenue on the range $710-740 million - up 51-58%. I am still confident that by the end of calendar 105, Workday will top out at $1 billion in revenue. From the blurbs:

4th Quarter fiscal 2014

  • Total revenues were $141.9 million, an increase of 74% from the fourth quarter of fiscal 2013. Subscription revenues were $110.7 million, an increase of 86% from same period last year.
  • Operating loss was $48.0 million, or negative 33.8% of revenues, compared to an operating loss of $30.7 million, or negative 37.6% of revenues, in the same period last year.

Full year, fiscal 2014

  • Total revenues were $468.9 million, an increase of 71% from fiscal 2013. Subscription revenues were $354.2 million, an increase of 86% from same period last year.
  • Operating loss was $153.3 million, or negative 32.7% of total revenues, compared to an operating loss of $117.9 million, or negative 43.1% of total revenues, last year.

Other key metrics

  • Operating cash flows were $46.3 million and free cash flows were a negative $29.6 million
  • Backlog as of end fiscal 2014 $636 million
  • Total future subscription revenue: $1 billion
  • Forecast revenue of $148-153 million for Q1 2014/15
  • Added 200 customers during the year, total now 600+

It's not surprising that attention is focused on how Workday is doing on the financials solution and whether the company has seen an inflection point. Aneel Bhusri, co-CEO said:

"I would not call it an inflection point, more continued momentum."

Talking to the acquisition of predictive HR analytics company Identified, Bhusri said:

"The last 5-7 years were about the emergence of the cloud as a platform, the next 5-7 years will see analytics. Identify has search and machine learning that we will embed into the HR product."

On the question of competition:

"It's not clear what SAP would offer. It's unclear what's happening with Business ByDesign and we just don't see Oracle Fusion."

Verdict

  • Workday is heading towards an inflection point. Getting close to the $500 million mark without faltering provides the company with the kind of momentum that is rare among SaaS companies.
  • My one concern centers around the lack of detail on market expansion and the splits between HR and financials. It's not clear to me why Workday is not providing that information in the press releases.
  • Regardless of Bhusri's remarks about the competitive landscape, Workday is absolutely in the crosshairs of SAP and Oracle as it moves from eating their side salad to the main course lunch menu. The difference is that Workday doesn't have to think about transforming an established business model. This means it can concentrate much more upon the product and its capabilities rather than worrying about margin topics.
  • The company is not concentrating as much on upselling into the installed base as it is on land grab. Workday reckons there are some 22,000 companies around the world that would fit its target profile. Reaching 600 is less than three percent of the total addressable market so it has a long way to go.
  • Adding Identified is a smart move. Workday is progressively distinguishing itself as an offering that concentrates on business outcomes rather than purely handling back end transactions. This is the future of enterprise business software and Workday is positioning itself well in that regard, ensuring that its messaging is both crisp and coherent.

Disclosure: SAP, Oracle and Workday are all premier partners at time of writing