Andreas Halvorsen and Viking Global Investors' 1Q 2014 positions (Part 4 of 8)
Viking Global and Workday
Andreas Halvorsen’s Viking Global Investors initiated new positions in Regeneron Pharmaceuticals (REGN), Pioneer Natural Resources (PXD), and Workday (WDAY). The fund sold positions in Danaher Corp. (DHR) and Walt Disney (DIS). Notable position increases included Illumina (ILMN) and Walgreens (WAG).
Viking Global Investors disclosed a new position in Workday Inc. (WDAY) last quarter. The position accounts for 1.20% of Viking’s total portfolio.
Founded in 2005, Workday delivers human capital management, financial management, and analytics applications designed for the world’s largest organizations. It’s a leading provider of enterprise cloud applications for global human resources and finance. As of January 31, 2014, Workday had more than 600 customers. Subscription service revenues accounted for over 75% of the company’s total revenues during fiscal 2014. Total revenues were $468.9 million for fiscal 2014, compared to $273.7 million for fiscal 2013—an increase of 71%.
Workday competes with enterprise application software vendors, such as Oracle Corporation and SAP AG. It also faces competition from cloud-based vendors, including providers of applications for HCM and payroll services (such as Ceridian, Inc.), providers of cloud-based expense management applications (such as Concur Technologies, Inc.), and providers of financial management applications (such as NetSuite, Inc.).
Workday is one of the fastest-growing ERP vendors
The stock fell 20% during the momentum stocks selloff in March and was considered to be a buying opportunity by analysts. The Gartner report Market Share Analysis: ERP Software, Worldwide, 2013, cited by Forbes in a recent article stated that Workday, Workforce Software, Cornerstone OnDemand, and NetSuite are the five fastest-growing ERP vendors worldwide from 2012 to 2013. Gartner said that worldwide ERP software market rose 3.8% from $24.4 billion in 2012 to $25.4 billion in 2013. SAP was the market leader in 2013, followed by Oracle.
Workday results topped estimates, sees accelerated adoption of financials product
Workday’s shares surged in February, as fiscal 4Q 2014 results beat estimates, although losses widened to $56 million or $0.32 per share against a loss of $31 million or $0.19 per share in 4Q 2013 due to an increase in costs. 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 the corresponding period last year. Management said, “During the year, we also accelerated adoption of our financials product, increased market presence in the education and government industries, and expanded our applications with the delivery of Workday Big Data Analytics.” The company added more than 200 customers in fiscal 2014.
The recent 1Q 2015 results beat estimates, with total revenues up 74% $159.7 million. Subscription revenues were $123.4 million, an increase of 80% from the corresponding period last year. Net loss per basic and diluted share was $0.32, compared to a net loss per basic and diluted share of $0.20 in the first quarter of fiscal 2014. Workday said total billings in the first quarter were $208 million and benefited from several new large customers.
Outlook for 2Q 2015: A sequential decline in total billings
Workday forecast second quarter revenues to be within a range of $173 to $178 million, or growth of 61% to 65% compared to the prior year. Total revenues for the year are anticipated to be in the range of $730 million to $750 million or growth of 56% to 60%. The company added that total billings for the second quarter are expected to decrease sequentially. Workday said, “For the year, we expect total billings to be approximately $890 to $910 million.”
Analysts remained bullish, and a UBS analyst noted on 1Q earnings, “Customer and deal metrics continue to improve, evidencing vast unmet demand that is filled as WDAY rolls out new functionality & products.”
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