Billion Dollar Unicorns: Workday’s Ramp to Multi-Billion Valuation

Continuing with the Billion Dollar Unicorn posts, here is another mega hit in the category: SaaS-based enterprise services provider for human resources, payroll and financial management, Workday (NYSE: WDAY).

Workday’s Financials

Workday was founded in 2005 by long-time friends and PeopleSoft alumni, Aneel Bhusri and Dave Duffield. The two met over brunch and decided that they wanted to start a company that offered cloud-based solutions for HR and Financial services. Dave was already a successful entrepreneur who had founded PeopleSoft and Aneel had worked at several leadership positions in PeopleSoft.

Soon, Workday was born with the mission of providing a fresh approach to today’s global businesses. Workday has successfully leveraged the cloud to provide their customers with a platform that delivers a complete view of the organization and provides insight into business events for faster decision-making. They help employees collaborate over multiple devices, use real-time data for decision-making, and deliver an intuitive user experience for effective resource management with minimal reliance on specialist information technology, human resources, or finance employees.

Since its founding, Workday has grown rapidly. Revenues have grown from $25.2 million in 2010 to $468.9 million for 2013. They ended the September quarter with revenues growing 68% to $215.1 million, surpassing analyst expectations of $205.3 million. Subscription revenues grew an impressive 75% to $164.4 million and Professional Services revenues increased 49% to $50.7 million.

The company still continues to report losses though. They ended fiscal 2013 with a loss of $0.54 per share. For the September quarter, losses came in at $0.10 per share compared with the Street’s forecast of a loss of $0.33 per share.

For the December ended quarter, Workday expects revenues of $219 million-$222 million compared with the Street’s forecast of $220 million.

Workday’s Product Expansion

Workday continues to grow their product offerings and recently introduced Workday Insight Applications, a new suite of applications that will leverage their advanced data science and machine learning algorithms to help their customers with improved decision-making systems. The application will be able to provide customers with insight into making more informed financial and workforce decisions. The application will be made available to the public starting this year.

They also introduced Composite Reporting as part of the latest release of Workday Financial Management. Composite Reporting is an advanced reporting tool that will cater to the reporting requirements of large organizations.

Workday went public in 2012. Prior to listing, they had received $175 million in venture funding from investors including Janus Capital Group, T. Rowe Price, Morgan Stanley, Bezos Expeditions, Dave Duffield, Greylock Partners, New Enterprise Associates, and IndoUS Venture Partners. They raised $637 million in their IPO and have seen valuations grow from $7.8 billion back in 2012 to nearly $15 billion this year. That is a rather high valuation for a company that is expected to end fiscal 2014 with with revenues close to $780 million. It did not take very long for Workday to reach the multi-billion dollar valuation group. Back in 2011, 6 years after being founded, they had raised $85 million in a funding round that valued them at $2 billion.

Their stock is trading at $79.42 with a market capitalization of $14.9 billion. It touched a 52-week high of $116.47 in March last year.

According to a MarketAnalysis report, the global HR software market is expected to grow 2.4% annually over the period 2015 through 2020 to be worth $9.2 billion. The growth is projected to be primarily driven by increased adoption of SaaS-based delivery models. Workday is positioned well in this market. They have already attracted big customers to their services and recently saw PwC become the largest services partner for their products in Canada.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in the TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns