Workday raises share price to $24-$26 for $4B valuation

The company expects to raise as much as $591 million

Tuesday got you all worked up and anxious?  Blood pressure raging because your boss is all up in your grill about those expense reports (or whatever it is middle-management bosses get angry about these days)?  How about we bring it down with a little pinot and some enterprise software news…

HR software provider Workday made a little tweak to its S-1 form on Tuesday to raise its share price to $24-$26, to raise as much as $591 million.  This bumps Workday’s valuation up to more than $4 billion.  The holders of Workday’s Class B shares—of which there are 137.5 million—will maintain 98% of voting power in the company, with co-CEOs David Duffield and Aneel Bhusri accounting for two-thirds of that.

Earlier this month, Workday priced its shares at $21-$24, so it looks like the company is seeing some high demand.

With 1,450 employees, Workday reported revenues of $134.4 million in 2011, up from $68.1 million in 2010 and $25.2 million in 2009.  That’s a pretty impressive increase—particularly between 2010 and 2011, when revenues spiked 170%.  But the company has also reported increasing losses over the years.  In 2011, Workday suffered a net loss of $79.6 million, up from $56.2 million in 2010 and $49.9 million in 2009.

And Workday admits that it’s going to keep losing.  Among its risk factors, the company notes that it has “a history of cumulative losses and we do not expect to be profitable for the foreseeable future.”  They’re definitely not sugar-coating anything.

But despite the seven-year-old company’s failure to turn a profit, it’s proven to be very popular among its enterprise customers.  With applications in 21 different languages, Workday serves 325 customers including Aviva International Holdings, AIG, Georgetown University, Four Seasons Hotels, Lenovo, and Kimberly-Clark Corporation, among others.  Its largest deployment to date was for an organization with a global workforce of more than 200,000 employees.

Founded in 2005 by Duffield and Bhusri, the company offers a suite of solutions to the everyday ins and outs of running a company, including payroll, financial management (billing, accounting, cash management, etc.), time tracking, and human capital management (absences, benefits, organization, and so on).  The solutions are a cloud-based alternative to in-house legacy enterprise applications, which are pricey, inflexible, and outdated.

IDC recently reported that the global market for enterprise resource management software totaled $39 billion in 2011.  The research group also estimates that Software-as-a-Service market will grow at a CAGR of 24% to reach $67 billion in 2016, compared to $23 billion in 2011.

Last fall, the company raised $85 million, bringing its total financing to $250 million, which had some experts estimating the company’s valuation to be $2 billion.  Financial backers include Amazon CEO Jeff Bezos’s Bezos Expeditions, Janus Capital Group, Morgan Stanley Investment Management, and T. Rowe Price, among others.  

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