Workday accelerates into fiscal 2023 with a strong year end as cloud adoption gets a COVID-bounce

Stuart Lauchlan Profile picture for user slauchlan March 1, 2022 Audio mode
Summary:
The pandemic has encouraged cloud adoption that's part of wider market trends in Workday's favor, argue Co-CEOs Bhusri and Fernandez.

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Bhusri and Fernandez

An acceleration in business delivered a strong year end for Workday with Q4 revenue up 21.6% year-on-year and up 19% for the full year. This led Co-CEO Aneel Bhusri to comment:

This acceleration in our business, along with our relentless focus on employees, customers and innovation, is serving as a strong foundation for driving durable growth on our path to $10 billion in revenues and beyond.

Q4 fiscal 2022 revenue was $1.38 billion, of which subscription revenue made up $1.23 billion, with a GAAP net income loss of $73.253 million. Full year revenue was $5.14 billion, with subscription revenue coming in at $4.55 billion of that total, with a GAAP net income of $29.3 million.

Other stats of note:

  • Workday currently services north of 60 million total users across 9,500 organizations worldwide, including 4,100 core HCM and Finance customers.
  • The firm now works with over 50% of the Fortune 500 and over 23% of the Global 2000.
  • Gross retention rate is over 95%.
  • 440 billion transactions were processed within Workday across fiscal 2022, up 67% year-on-year.
  • New HCM customer wins in Q4 included Allied Financial, DICK'S Sporting Goods, National Australia Bank Limited, RiteAid Corporation, Smith Hill Foods and 7-Eleven.
  • New Finance customer wins for the quarter included Genpact Limited, Mass General Brigham, University of Melbourne and US Bank.

Customer growth internationally has improved noticeably, said Co-CEO Chano Fernandez:

We have a healthy growth across regions with significant wins at companies such as National Australia Bank, Genpact and the University of Melbourne, Power Leisure, among others. I would say as the new customer base grows internationally, we are adding sales capacity in our customer-based teams internationally as well. And finally, Peakon [the employee engagement offering acquired last year] has also helped open new customers and opportunities for us, and they had a really strong quarter in EMEA landing new customers.

He added:

International remains one of the largest opportunity for us and we're really in the early innings of the journey, but still having a great foundation and proof point with many referenceable customers across HCM and Financials at this point.

Accelerating

As for that acceleration in business, one driver here has been a sort of wider COVID-bounce effect on cloud adoption overall, suggested Bhusri:

I think for anybody that was going through the pandemic and was still on-premise, it’s really tough to run your business with those kind of applications and so, as difficult as the pandemic was, I do think it was a forcing function to move to the cloud for the ability to run your business remotely or at least in a hybrid manner, and we benefited from that.

That’s been particularly the case on the Finance side of the business, he added:

Definitely the function took a hit during COVID because [they] were viewed as longer-term projects, but those projects are coming back online very quickly. It's not back to pre-COVID days, but it's coming back, and that's a very positive data point for us. And candidly, as it relates to Finance, it really just is a two-horse race between us and Oracle - and there's plenty of room for both of us. Oracle is doing well; we're doing well. As the market comes back, there's a huge growth opportunity for both of us.

Overall, the firm enters fiscal 2023 on the front foot. Fernandez said:

In order to capitalize on that momentum, we plan to continue making significant investments within our go-to-market and service and support team with key focus areas, including customer base, international industry and emerging land motion, all of which are important growth vectors in achieving our goal of sustaining 20% plus subscription growth well into the future.

He added that there are “undeniable” wider market trends that favor Workday:

[There is] a significant amount of digital transformation happening across many businesses [and] in all industries. And we're truly the backbone to enable those transformations and really the only cloud-first solution doing so across HCM/Finance legacy systems that aren't built for the always on doing business and can't support current business models and business agility.

[Organizations] need to engage better with employees. They're changing workforce and skills understanding. So just to name a few, these are all C-level and CEO discussions that we're having, and frankly, we are really well positioned to provide solutions to those challenges and partner and help our customers to transform.

My take

A powerful year end - and also, as Bhusri revealed, something of the end of an era for Workday as co-founder and former CEO Dave Duffield has stepped down from the Board of Directors. (He remains the company’s largest shareholder and Bhusri noted he will still be on tap to provide advice to the firm he co-launched 17 years ago.)

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