WDAY is scheduled to report fourth quarter earnings tonight after the close.

Q4 Consensus calls for EPS of ($0.05) vs ($0.06) last year on revenue of $319.6 mln (+41% YoY). The current consensus is near the upper end of the company's Q4 revenue guidance of $317-320 mln. The company is expected to guide for the first quarter where consensus calls for revenue of $343.0 mln.

The first area of interest will be subscription revenues. Last quarter, subscription revenues were $243 mln, up 48% from last year. The weighted average duration of new contracts signed in the company's third quarter was about four years, driven by large accounts with longer durations. Derived billings, which represents total revenues plus the sequential change in unearned revenue, was $340 mln for the quarter or 41% growth from a year ago. Billings are impacted by a number of factors, particularly as renewals become a more significant component of total billings during the quarter. (BRIEFING**)

Looking ahead to the fourth quarter, the company expects subscription revenues are anticipated to be within a range of $260 mln to $261 mln, reflecting year-over-year growth of 43% to 44%. 

Implied Volatility

Based on WDAY options, the current implied volatility stands at ~ 60%, which is 19% lower than historical volatility (over the past 30 days). Based on the WDAY Weekly Mar04 $60 straddle, the options market is currently pricing in a move of ~11% in either direction by weekly expiration (Friday).

Technical Perspective

• WDAY shares have underperformed the S&P so far this year with WDAY falling by 26% vs 4% loss in the index. WDAY tends to have 4-6% reactions to earnings. On a positive report, look for resistance  ~$62.00, while support sits ~$57.50