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Workday(WDAY) - 2026 Q1 - Earnings Call Transcript
WDAYWorkday(WDAY)2025-05-22 21:32
Financials
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Financial Data and Key Metrics Changes - Workday reported a 13% growth in subscription revenue, totaling 2,059millionforQ1FY2026,withtotalrevenuereaching2,059 million for Q1 FY 2026, with total revenue reaching 2,240 million, also up 13% [28][30] - Non-GAAP operating margin for the quarter was 30.2%, while GAAP operating income was impacted by a 166millionrestructuringcharge,resultinginaGAAPoperatingincomeof166 million restructuring charge, resulting in a GAAP operating income of 39 million [30][31] - The twelve-month subscription revenue backlog (CRPO) increased by 15.6% to 7,630million,andtotalsubscriptionrevenuebacklogroseby197,630 million, and total subscription revenue backlog rose by 19% to 24,620 million [29][30] Business Line Data and Key Metrics Changes - More than 30% of net new wins in Q1 were full suite, with over 50% in focused industries like healthcare and SLED [11][43] - New ACV from AI products more than doubled year-over-year, with approximately 25% of customer expansions including AI solutions [12][88] - Professional services revenue was 181million,contributingtotheoverallrevenuegrowth[28]MarketDataandKeyMetricsChanges−U.S.revenueinQ1totaled181 million, contributing to the overall revenue growth [28] Market Data and Key Metrics Changes - U.S. revenue in Q1 totaled 1,680 million, up 13%, while international revenue also grew by 13% to 559million[28][29]−ThecompanysawnotablewinsinEMEAandAPAC,withsignificantexpansionsinvarioussectorsincludinghealthcareandmanufacturing[24][25]CompanyStrategyandDevelopmentDirection−WorkdayisfocusingonAIintegrationandinnovation,withastrongemphasisondeliveringROIforcustomers[20][26]−ThelaunchofWorkdayGoaimstoacceleratedeploymentformediumenterprises,allowingimplementationsinaslittleas30to60days[14][51]−ThecompanyisinvestingheavilyinAIandexpandingitspartnerecosystemtodrivegrowthandinnovation[21][72]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinmaintainingguidancedespitemacroeconomicuncertainties,citingstrongcustomerdemandandthevaluepropositionoftheWorkdayplatform[40][42]−ThecompanyiscloselymonitoringspecificmarketslikeSLEDandinternationalbusinessforpotentialimpactsfromthemacroenvironment[25][108]−ManagementhighlightedtheimportanceofAIindrivingcustomerengagementandfuturegrowth,withexpectationsforcontinuedstrongadoption[88][98]OtherImportantInformation−Workdayendedthequarterwith559 million [28][29] - The company saw notable wins in EMEA and APAC, with significant expansions in various sectors including healthcare and manufacturing [24][25] Company Strategy and Development Direction - Workday is focusing on AI integration and innovation, with a strong emphasis on delivering ROI for customers [20][26] - The launch of Workday Go aims to accelerate deployment for medium enterprises, allowing implementations in as little as 30 to 60 days [14][51] - The company is investing heavily in AI and expanding its partner ecosystem to drive growth and innovation [21][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining guidance despite macroeconomic uncertainties, citing strong customer demand and the value proposition of the Workday platform [40][42] - The company is closely monitoring specific markets like SLED and international business for potential impacts from the macro environment [25][108] - Management highlighted the importance of AI in driving customer engagement and future growth, with expectations for continued strong adoption [88][98] Other Important Information - Workday ended the quarter with 8 billion in cash and marketable securities and announced a new 1billionopen−endedbuybackauthorization[31]−ThecompanyismaintainingitsFY2026operatingcashflowoutlookof1 billion open-ended buyback authorization [31] - The company is maintaining its FY 2026 operating cash flow outlook of 2,750 million and capital expenditures of approximately $250 million [35] Q&A Session Summary Question: Can you discuss the current macro environment and how it affects guidance? - Management noted that the Workday value proposition remains strong, with customers consolidating on the platform for better ROI and TCO, despite some headwinds in specific industries [40][41] Question: What is the potential impact of Workday Go on medium enterprises? - Workday Go is designed to accelerate deployment and improve pricing and packaging for medium enterprises, allowing for faster implementations [51][52] Question: How is the adoption of Xtend and XtendPro progressing? - Adoption of Xtend and XtendPro is increasing, with significant growth in partner applications and customer customizations [58][60] Question: What are the growth rates for HCM versus Financials? - Both HCM and Financials are performing well, with a strong sales motion for full suite offerings contributing to overall growth [62][64] Question: How is the company approaching capital allocation in the current environment? - The focus remains on organic growth and strategic investments, with a commitment to returning capital to shareholders through buybacks [84][85] Question: What is the outlook for AI product monetization? - Strong adoption of AI solutions is already being seen, with expectations for continued growth and monetization opportunities in the near future [98][99]