Coming off the back of Salesforce’s earnings earlier in the week, Workday provided a boost for cloud firms stock prices with its own strong numbers with a 33% jump in revenues to $743.2 million. The firm turned in a net loss of $153,000. Subscription revenue was $624.4 million, up 34.7% year-on-year.
New customers for the quarter included Bank of Montreal, Glencore International, and Piedmont Airlines in HCM and Atlanta Braves baseball, Spectrum Health and Fox in finance. CEO Aneel Bhusri says the financial management offering’s traction is picking up well:
We have been growing the business at over a 50% clip on the subscription revenue side now for quite some time. The medium enterprise business continues to be very strong for financials. I think sometimes people discount how good that opportunity is for us, not just in the US, but across the globe. And we are continuing to see the move amongst large enterprises. I won't say that all Fortune 500 accounts are showing up at once, but the rate of Fortune 500 accounts showing up to evaluate financials for the cloud is definitely picking up.
And word of mouth is paying off here, he added:
I do think that one of the things that CFOs are…by nature a fairly risk averse crowd,. We’re now over 500 customers who are using Workday Financials and I think 70% of them are live and in production. So now there is a cohort of very happy customers using the system to close their books and run their business. So CFOs can ask their peers about Workday and financials in the cloud, and a few years ago, that was a much smaller universe of companies you could talk to.
Q3 was the first with Adaptive Insights as part of the Workday mix, noted Bhusri:
We got off to a great start together, accelerating the pace of adoption of cloud planning with early success selling Adaptive Insights product to large enterprise customers. Indeed, the early feedback on the Adaptive business plan and cloud offerings from customers and prospects alike has been very positive with high interest and enthusiasm for the Adaptive offerings.
We are actively working on migrating many of our Workday planning customers to Adaptive. While we will continue to support Adaptive integrations with all ERP systems, we are on track to 12 to 15 month delivery of the Power of One which will benefit our customers with access to one source for data, one security model, one user experience and of course one Workday community that enables them to plan, execute and analyze on one platform.
In terms of prospects, there’s still a lot of untapped business, said Bhusri:
We're not quite yet at 200 of the Fortune 500. We're at 50% of the Fortune 50. I think we can do a lot better. Without being negative on our competition, the reality is they don't have proof points of large companies in production and we're beginning to be where we continue to see the network effect of large companies who are happy with Workday, referencing to other large companies who haven't made a choice yet in the cloud.
So I think there's still a lot of opportunity for us, especially as you get outside North America where, depending on the geography, they're three to five years behind in cloud adoption and they're looking across the globe to see what their peers have done.
A multi-national thinks like a multi-national, independent of where they're based and they want to have successful deployments and as you look at the multi-nationals in the other geographies and they see a lot of successful Workday deployments it's impacting their decisions. So there's still a lot of opportunity in front of us.
That said, while the US economy is on a high, other parts of the world face uncertainties in 2019, such as Brexit’s impact in the UK and on other European Union economies. Bhusri said he hears some common themes from CEOs and CFOs at present:
I generally hear that business is good and the uncertainty in the global political environment gives them pause. And I just don't know how much of what gives them pause is just rhetoric. Some companies are worried about the aspects of a potential trade war. So will that factor into the way they're thinking? Right now it seems like bluster back and forth.
I would say if you just separated out the business cycles, it still seems like we're in a good part of the global growth economy cycle. It seems like most economies are doing well. I think Europe is doing surprisingly well based on what people expect it to be doing. But there's this hangover of uncertainty coming from the political environment that's not just limited to the US, but somewhat happening everywhere. I don't think any of us really know how to factor that in or predict it.
So I would say stay tuned. Right now, we're just trying to ignore it. The new normal in the world is political volatility and hopefully it doesn't have a huge amount of impact on our business.
A solid quarter that made Wall Street happy. Bhusri’s pragmatic assessment of the ‘new normal’ rings true, with ‘keep calm and carry on’ as an unspoken mantra. But for now, a positive end to calendar 2018 for Workday.