A strong start to fiscal 2020 for Workday with impressive year-on-year revenue growth and continuing momentum for its financial offerings. Overall revenue rose 33.4% to $825.1 million, with subscription services accounting for 85% of that, up 34.3% to $701 million. Net loss was $116.3 million against $74.4 million for the same period last year.
As ever it was to new customer adoption and go-lives that CEO Aneel Bhusri pointed to on the post-results call with analysts. On the HCM front, he cited Carl Zeiss AG, Cisco Systems, Daimler Trucks North America, Old Mutual Limited and Procter & Gamble as new wins during Q1, with Advocate Aurora Health System and E-Trade Financial Corporation picked out on the financials side. He also highlighted 150 standalone Adaptive Insights wins, including Airbus, AstraZeneca, AutoZone Parts, H&R Block and the Ohio State University.
All of this is, as Bhusri put it, “taking some of the pressure off HCM”, stating:
We still have more work to do to really establish ourselves as leaders outside of HR. We want that same leadership position for financials, for planning.
But he added:
I think the HR product line continues to do very well. And we are now on mainstream in terms of the types of customers that are looking to move to the cloud and with the high levels of customer satisfaction and the proven points of customers being live, I think it just bodes well for Workday. I think if there is anything that I would say about this quarter is that all the product lines are beginning to kick in.
More large customers are now looking to cloud offerings for finance functions, he noted:
We are seeing a very similar adoption pattern for Fortune 500s as we did in HR five or six years ago. The more reference customers we have, the more that customers are facing painful upgrades of their legacy systems, the more that the regulations change with things like 606, those are all catalysts. I do think that the cloud is now viewed as the preferred deployment option versus on-premise, even for CFOs and whether that's through planning or through core accounting, I think that that is happening as well. That has been the case in HR and CRM for a while. It's beginning to happen in finance now.
It’s important that customers don’t feel forced to the cloud as some vendors try to do with their installed base, he added:
Anytime a customer is facing an upgrade from the legacy platform, they tend to look around and all we want to do is just to be in the mix of conversations. There definitely are customers that probably don't come to market, but increasingly customers are smart about their choices. [Being forced into non-value upgrades] just drive customers into a decision-making process and they look at alternatives and hope we do well as part of those evaluations. Customers don't like, they don't want, to be forced to do anything. But I think if they are being pushed to move into the cloud, if I were them, I would say, ‘hey take a look at all the alternatives that are out there before you make a decision’.
That also means a shift in partner activity. Bhusri explained:
Finance is definitely now more than half of the ecosystem…That was the case for HR many years ago. I am going to guess it's better than 80/20 for HR. I am not quite sure where it is for finance, probably tracking close to that. But partners have all…embraced financials and in some cases, some of the firms that were late to embracing HR have made up by embracing finance early. And then we have got the boost from these partners embracing Adaptive. So I feel very good about the partner engagement on financials. Our stated goal is that our services [are] there to support our customers and they are for customer satisfaction, but we really count on our partners to take on the bulk of the implementation work.
A product focus now is weaving machine learning capabilities across the Workday portfolio, with Bhusri pitching this a long game:
We have been, for the last three years, basically sowing in the machine learning capabilities into the platform rather than making it a feature app-by-app, right. You could add machine learning to one specific app, but it's not leveraged by the rest of the application. So we are taking the longer term approach of building it into the fabric and today we have got several examples of where it's shown up. In the career planning world, the system can make recommendations for the next move you should take or the next course you should take on the learning side. In the finance world, a lot of automation around the audit process.
With 100 customers signed up for pilots around machine learning, this is something that will be getting more of an airing later in the year. Elsewhere there’s a commendably pragmatic approach being taken on other ‘must do’ tech trends, such as RPA. Bhusri puts this in the ‘to be determined’ category:
We make investment in a lot of interesting technologies. This new world of automation is definitely interesting to us. But we haven't made any decision yet to bring it into our own platform. And some of the estimates in terms of reduced time, we haven't been able to validate those ourselves. So we continue to invest heavily in our technologies to reduce the cost of implementation. And if some of this RPA stuff can reduce the cost of implementation or reduce the time, we definitely would embrace it but unclear at this point. It's an exciting new area, but unclear that this is something that we are going to bring in closer to Workday.
As noted above, a good start to the fiscal year with momentum evident across the Workday platform. The logo wins continue to stack up and the addition of Adaptive into the mix looks as though it’s paying off. Onwards!