Workday shares fall on weak billings forecast

By Arathy S Nair and Lehar Maan

(Reuters) - Workday Inc (WDAY.N), a provider of cloud applications for finance and human resources, forecast third-quarter billings below expectations, saying it would receive less money in advance for newer contracts in the quarter, sending its shares down after the bell.

The company said billings were also affected, as it took a lion's share of the money upfront for some older contracts, resulting in smaller billings now.

Workday's shares traded down 7.2 percent at $67.20 after-the-bell.

"For the contracts that have been signed previously, they were invoicing more upfront, typically more than the first year contract value and now when the time comes for the second invoice, it's a smaller invoice," Wedbush Securities analyst Steve Koenig said.

"For new contracts that are in the pipe...they expect that they will not invoice much upfront as they used to," Koenig added.

He said the move would help Workday win more deals and "improve the economics of the deals."

The company forecast billings, a key indicator of future sales, of $310 million-$315 million in the fiscal third quarter ending October. That was below the estimate of market research firm FactSet StreetAccount's for $336.8 million.

"We're putting the decision-making much closer to the customer in the field and we're just anticipating that we'll have some modest decline in the amount of cash that we collect as a percent of average contract value in the first year," Workday's chief financial officer, Mark Peek, said on a conference call with analysts.

Workday, which competes with Oracle Corp (ORCL.N) and SAP SE (SAPG.DE), estimated third-quarter revenue of $300 million-$303 million. Analysts were expecting $302.2 million, according to Thomson Reuters I/B/E/S.

For the fiscal second quarter ended July 31, the company reported a 51.4 percent jump in revenue, to $282.7 million. Analysts on average had expected revenue of $274.1 million.

The net loss widened to $69.4 million from $69.2 million. The loss per share fell to 37 cents from 38 cents, reflecting an increase in shares outstanding.

According to Reuters calculation - which excludes share-based compensation, other operating expenses, amortisation of debt discount and issuance costs - Workday had an adjusted profit of 2 cents per share, its first ever profit.

Analysts on average had expected a loss of 6 cents per share.

Workday raised its revenue forecast for the fiscal year ending in January of $1.150 billion-$1.158 billion. Analysts were expecting of $1.14 billion.

Through Wednesday's close, Workday's shares were down 11.3 percent this year.

(Reporting by Arathy S Nair and Lehar Maan in Bengaluru; Editing by Maju Samuel and Leslie Adler)