Workday (WDAY +12.8%) has caught an upgrade to Outperform from Baird, as well as a few PT hikes, after beating FQ3 estimates, issuing strong FQ4 guidance, and reporting an acceleration in unearned revenue growth.
Workday mentioned on its CC (transcript) it added over 50 customers in FQ3, including eight Global 2000 clients and ten buyers of its Financials software (still a much smaller part of Workday's business than its HR software). Total customers are now above 550.
The weighted average duration of new contracts was 3.4 years. Workday typically collects a little over a year of the contract value up-front, and then recognizes it as revenue a quarter at a time (the rest goes into unearned revenue)
Also: 1) Subscription and professional services gross margins rose 122 bps and 432 bps Q/Q, respectively. 2) Headcount rose to nearly 2,400 from 2,120 at the end of FQ2. 3) Billings are expected to be down Q/Q in seasonally weak FQ1.
Jefferies has raised its PT to $92. The firm praises Workday's customer adds and Financials momentum, and declares the company "has amongst the most attractive share gain potential in software."