Workday(US:WDAY)2021-08-27 01:40Financial Data and Key Metrics Changes - Subscription revenue for Q2 was $1.11 billion, up 20% year-over-year, driven by strong new business sales and high customer renewals with gross retention over 95% [32] - Total revenue reached $1.26 billion, with professional services revenue at $147 million [32] - The 24-month backlog at the end of Q2 was $6.88 billion, a growth of 19%, while total subscription revenue backlog was $10.58 billion, up 23% [33] - Non-GAAP operating income for Q2 was $292 million, resulting in a non-GAAP operating margin of 23% [34] - Operating cash flow in Q2 was $198 million, reflecting a growth of 26% [34] Business Line Data and Key Metrics Changes - The Workday Adaptive Planning business saw nearly 50% ACV growth, indicating strong demand for financial management applications [15] - New core financial customers in Q2 included Cinemark U.S.A., University of Wisconsin System, and Wise Markets, showcasing growth in core financial deployments [16] - Peakon's first full quarter resulted in the largest quarter in its history, indicating strong traction in employee engagement solutions [14] Market Data and Key Metrics Changes - Revenue outside the U.S. was $318 million, up 24% year-over-year, representing 25% of total revenue [33] - EMEA showed healthy acceleration in new ACV bookings, particularly in France and Spain, indicating strong international market performance [27] Company Strategy and Development Direction - The company is focused on broadening its platform and extending product capabilities, including the introduction of Workday Payroll for Australia and Germany [17] - Workday achieved ready status for the Federal Risk and Authorization Management program (FedRAMP), enhancing its position to assist federal agencies in digital transformation [18] - The company plans to invest heavily in its workforce and culture, with a new cash bonus plan to motivate employees [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong digital transformation demand across HR and finance sectors [20] - The company anticipates continued growth momentum in the second half of the year, driven by a robust pipeline and customer demand [20] - Management noted that the pandemic has accelerated the need for companies to modernize their systems, leading to increased demand for Workday's solutions [58] Other Important Information - The company plans to ramp up hiring, targeting 2,500 new employees by the end of the fiscal year [36] - Non-GAAP operating margins are expected to be 21% in Q3 and 16% in Q4, with a full-year expectation of 21% [40] Q&A Session Summary Question: Can you discuss the acceleration in ACV growth and what factors contributed to it? - Management noted that CEOs are optimistic about digital transformation, leading to increased actions and pipeline activity [46][48] Question: How is the backlog growth impacted by the expiry base? - Management confirmed that the expiry base is affecting the 24-month backlog but does not impact new ACV bookings or subscription revenue [50] Question: What is the strategy for surrounding accounts with peripheral systems? - Management highlighted the importance of having a combination of HCM and financial modules, noting strong demand for core financial systems [55] Question: How is the hiring environment progressing? - Management indicated that hiring is back-end loaded, with a strong recruiting engine in place to meet targets [76] Question: What is the contribution of new customers versus existing customers to the backlog? - Management stated that while the backlog is shifting towards renewals, there is a notable contribution from new customers this year [84] Question: How do you see the sales opportunity in the federal segment post-FedRAMP? - Management expects to see a build-up in the pipeline for federal agencies, with HR and financial solutions being a good fit [111] Question: What is the outlook for payroll functionality expansion? - Management plans to continue investing in payroll integration globally, focusing on country-by-country development [113]