Momentum is back as CEOs look forward and Workday looks to meet pent-up demand

Profile picture for user slauchlan By Stuart Lauchlan May 27, 2021
Summary:
As the Vaccine Economy takes shape, there's a return to digital acceleration that bodes well, say Workday's co-CEOs.

Workday
(Bhusri and Fernandez)

Clearly, the momentum is back.

A confident assessment from Workday co-CEO Chano Fernandez on the back of the firm turning in some strong Q1 numbers as the Vaccine Economy shapes up.

For the quarter, total revenue rose 15.4% from a year ago to $1.18 billion, while subscription revenue rose 17% to $1.03 billion. The firm turned in a loss of $46.5 million, well down on last year’s comparable loss of $158.4 million. Revenue outside the US was $292 million representing 25% of the total.

Fernandez co-CEO Aneel Bhusri is confident that things are picking up in the wider world, based on his own conversations with his peers:

I won't say everybody, but a lot of industries are looking forward now, including airlines, including travel companies. We seem to be putting the pandemic as much behind us as we can and people are looking forward to the future. And when they do that, it bodes well for us. I think that's what’s happened. It probably happened a quarter earlier than we expected, where the return to normalcy would begin to show up in not just the pipeline, but actually in deals closed.

Among such deals in Q1 were, for HCM, ASM Global, Las Vegas Sands Corp. Mattel, Five Below Inc. and Cost Plus World Market , while go-lives included  Fielmann AG, University of Sydney and Macquarie University. In terms of finance wins, new customers included Los Angeles Department of Water and Power, and Saint Francis Health System Incorporated with add-on wins at FHI and Werner Enterprises.

Finance growth 

Finance is a key part of the re-acceleration story, says Fernandez:

Not only did we have several strategic wins in Q1, we have solid finance pipeline growth as well. There are also emerging opportunities through our enterprise finance solution, where we are now much better positioned to go after product-based industries, like retail and manufacturing.

What we're seeing in finance is just the maturation of the pipeline that we've been working on. We're becoming a much more prominent and referenceable solution in the market with many more references. Then, of course, the broader offer that we have today in terms of the number of SKUs that we have around finance is much more complete than it was in the past.

Last, but not least, I would say, enterprise finance is helping us up to address the market that certainly we could not address before. In some areas like financial services, clearly Accounting Center has been very strategic and very significant for us to have a very formidable finance offering. I would say some of the investments that we've been starting to do around brand awareness and the office of the CFO are also helping out as well in some of our international markets with our finance solution.

As for HCM, as offices and workplaces cautiously re-open their doors, it remains to be seen exactly what form the so-called Future of Work will take. Fernandez says:

We'll need to see how it plays out. But we're certainly seeing [C-level execs have] clearly been prioritizing employee engagements and back to work and HR offerings. But right now, we are seeing as well as how they start to reconsider, there is some sort of pent-up demand, I would say, in terms of overdue projects on the office of the CFO that should have been done, that they're starting to get it done. So I think it's that that we're seeing in terms of that digital acceleration transformation as a whole and we play very well on that one as the enterprise backbone of that transformation.

For its own part, as the world returns to some form of normality. Workday is planning expansion of its own headcount around the world, with Bhusri stating:

We plan to increase our global workforce by more than 20% or 2,500 new hires in fiscal year 2022. In doing so, we'll have an even stronger foundation to scale and innovate on our path to $10 billion.

My take

A strong start to the new fiscal year, one in which that pent-up demand to which Fernandez alludes is waiting to be satiated.