Workday raises revenue forecast as software subscription grows

Tue May 27, 2014 6:31pm EDT

(Reuters) - Workday Inc (WDAY.N) raised its full-year revenue forecast after reporting better-than-expected quarterly revenue as more companies, especially in the financial sector, opted for its web-based human resources software. Shares of the company rose 6 percent after the bell. Workday, which makes software to manage employee performance, payroll and expense, added 60 new customers in the first quarter and ended the quarter with over 675 customers including Nationstar Mortgage Holdings Inc (NSM.N), Hewlett-Packard Co (HPQ.N) and Cushman & Wakefield.

The company raised its full-year forecast to $730-$750 million from $710-$740 million. Analysts on average were expecting $735.4 million for the year ending Jan. 31, 2015, according to Thomson Reuters I/B/E/S.

"We had another quarter of double-digit customer growth welcoming big name companies," Chief Executive Aneel Bhusri said on a conference call.

The company, which competes with SAP AG (SAPG.DE), Oracle Corp ORCL.O and NetSuite Inc (N.N), also raised its full-year billings forecast to $890-$910 million from $850-$870 million.

Billing is an indicator of future sales. Oppenheimer analyst Brian Schwartz added that the company's billings outlook is conservative and there may be room for growth.

Cloud computing software, which lets customers process data on remote servers, is faster and cheaper than traditional in-house systems. More companies are opting for web-based software as they are easier to update, maintain and customize.

Cloud-related spending is expected to rise to $235 billion by 2017 from $174 billion projected for 2014, according research firm IHS Inc (IHS.N).

Workday forecast second-quarter revenue of $173-$178 million, ahead of average analyst estimate of $171.5 million.

First-quarter revenue rose 74 percent to $159.7 million, beating Wall Street estimates of $152.4 million. Subscription revenue rose 80 percent.

The company's net loss widened to $59.4 million, or 32 cents per share, in the quarter ended April 30, from $33 million, or 20 cents per share, a year earlier.

Costs rose about 71 percent as the company spent more on product development and sales and marketing.

Excluding items, the company reported a loss of 13 cents per share, better than analysts expectations of a loss of 15 cents per share. The company, which went public in 2012, is yet to report a profit. Shares of the company closed at $82.13 on Tuesday on the New York Stock Exchange. The stock has lost 30 percent of its value over the last three months as investors sold off shares of high-flying "cloud" companies on valuation concerns.

(Reporting by Soham Chatterjee and Sampad Patnaik; Editing by Don Sebastian)

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