Workday reports an 82% increase in subscription revenues for HR and financials applications as it takes big customers live on its cloud-based apps.
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Workday still qualifies as a comparatively small startup company, but it's slugging with big boys SAP and Oracle. On Monday, Workday reported double-digit gains in revenues in its third fiscal quarter as high-profile customers, including Thomson Reuters, Sanofi, Diageo, and Morgan Stanley, went live on its cloud-based applications.
Workday's revenue for the three-month period ended October 31 was $127.9 million, up 76% from the prior-year period and more than $10 million ahead of financial analyst expectations. Subtracting services revenues, subscription income was up 82% from the prior-year quarter to $93.9 million. The company projected fourth-quarter revenue of $133 to $138 million, ahead of the $128.9 million figure Wall Street was expecting.
Workday is pouring money raised in its $685 million 2012 IPO into product development and hiring sales and support staff, so it is far from profitable. Nonetheless, the non-GAAP loss of 12 cents a share was better than the 17-cents-per-share-loss that Wall Street expected.
Two-thirds of Workday's 550 customers are now live on its cloud apps, reported company co-founder and co-CEO Aneel Bhusri. The vast majority of those customers use the company's mature human resources applications, but Bhusri reported progress on the company's cloud-based financial-management suite, which it has been developing over the last three years. Workday added 10 financials customers in the third quarter and now has 25 customers overall.
Whereas Workday's HR apps are used by Fortune 1000 companies, including Flextronics, HP, Thomson Reuters, and Sanofi, its financial apps are used by educational institutions, such as Brown University, and midsize companies, including transportation firm J.B. Hunt.
"We're ramping up our financials functionality quickly and we have another wave of bigger companies coming online," Bhusri said.
As the financials product matures, Bhusri said Workday will move into the Fortune 1000 market, where the company is winning sales with its HR suite. The cloud-based HR suite is most often deployed as a replacement for legacy Oracle PeopleSoft and SAP systems, Bhusri reported.
Workday's Rising 2013 customer conference had more than 3,500 attendees.
Workday is counting on a new revenue stream from a recruiting application set for launch in the spring of 2014. The application complements the HR suite and answers cloud-based competition from Oracle Taleo and SAP SuccessFactors. The company is also developing a Workday Student app for the higher-education market that it plans to bring online starting next year.
In recent months Oracle and SAP seem to have intensified their focus on cloud growth, and they're more often citing instances of beating Workday in competitive deals. SAP reported a 79% increase in cloud subscription and support revenue to $520 million in its third quarter ended September 30. That's against a reported base of approximately 6,000 SaaS customers, putting the average quarterly revenue per customer at about $87,000.
By contrast, Workday can boast of having deeper relationships with a much smaller customer base. The company's average revenue-per-customer across 550 customers exceeded $230,000 in the third quarter, making it clear it's winning deep commitments to using mission-critical applications in the cloud.
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