Workday returns to profit with strong year end numbers, makes talent management AI acquisition

Stuart Lauchlan Profile picture for user slauchlan February 27, 2024
Summary:
A good year end for Workday and a strong base on which CEO Carl Eschenbach can build in fiscal 2025.

workday

A busy day for Workday yesterday as the firm turned in a Q4 profit as well as announcing plans to beef up its generative AI capabilities with the acquisition of HiredScore, a start-up provider of AI-powered talent orchestration tools. 

For Q4, Workday reported a profit of $1.188 billion, compared to a year ago loss of $126 million, on revenue of $1.922 billion, up 17% year-on-year. For the full fiscal 2024 year, revenue was also up 17% to $7.26 billion, with net income of $1.381 billion, compared to a 2023 full year loss of $387 million. 

It’s a strong start for Carl Eschenbach to build on in his first quarter as sole CEO. Eschenbach stepped up from being co-CEO alongside founder Aneel Bhusri on 1 February. Other stats of note from the post results analyst call: 

  • Subscription revenue in Q4 was $1.76 billion, up 18%, and up 19% for the full year to $6.6 billion.
  • Professional services revenue was $162 million in the quarter and $656 million for the year.
  • Q4 US revenue was $1.44 billion, up 16%, and $5.46 billion for the full year, up 17%. 
  • International revenue was $478 million in Q4, up 21% year-on-year, and up 17% for the full year to come in at $1.8 billion. 
  • New full platform - HCM and Financials - customers during Q4 included the Australian Stock Exchange, Boyd Gaming Corporation, HHS, Randstad, UHS of Delaware and VXI Global Solutions. 
  • New HCM customers included Crane Company, El Corte Inglés, Hitachi Astemo, Hungry Jack's, Kohler Co., and Swisscom.
  • New Financials go-lives included American University, Sagility Operations and UMass Memorial Health. 
  • New HCM go-lives included AT&T, Northern Trust and Whataburger.

The full platform approach is working, said Eschenbach: 

As we've said for the last year, we are focusing on delivering a full platform solution to our customers, both HCM and Financials, and we have seen a nice uptick in our selling motion there. In the medium enterprise, we're seeing a big uptick, so our full platform sales are going up, but we're also seeing it in the upmarket as well in large enterprise. And then there are certain industries where we see it like state and local government. We see it in healthcare. Our healthcare business had a really big quarter, a 50% growth year-over-year. So it is definitely a selling motion we're leaning into.

And I think, quite frankly, we're just getting started. Our Financials platform continues to gain momentum in the market. We're able to sell FINS back into our existing HCM customers, so they become full platform customers. And net new sales, a lot of them are full platform from day one. So the full platform approach we're taking is clearly paying dividends and driving our growth.

Talent 

Explaining the planned HiredScore acquisition, Eschenbach turned to the theme of trust and AI:

The theme of building trust took center stage at the World Economic Forum annual meeting in Davos last month. Throughout my conversations, it was clear to me that leaders see the business benefits of implementing AI, but they also recognize building trust is key. 

Workday stands apart in our commitment to the responsible development of AI technologies, its responsible deployment within our own company and our advocacy for its regulation. We've been delivering AI capabilities to our customers for nearly a decade, building AI into the core of our platform, and we're making significant investments to further enhance our leadership in this area.

Workday Skills Cloud, for example, uses AI to gain insights into an organization's current skills and identifies skills needed for the future, allowing for smarter decisions about talent across the company. In our upcoming R1 release, many of the generative AI use cases we showcased at Rising [Workday’s annual conference] will be put into the hands of early adopters, including job descriptions and knowledge articles. 

To further accelerate our AI road map, today, we're excited to announce our planned acquisition of HiredScore, which provides AI-powered talent orchestration solutions. HiredScore's technology delivers data-driven insights to help improve recruiting and internal mobility processes. The combination of our data set in Workday Skills Cloud with HiredScore's solution will provide customers with a transparent, AI-powered talent acquisition and internal mobility offering. Not only is it technology compelling, but HiredScore and Workday share a commitment to responsible AI development, including a focus on explainability and transparency. 

The move also taps into the customer interest that Workday has seen around AI in talent management, he added: 

I do think the first place we're seeing true productivity gains is around what I would just describe as talent acquisition. And when you think about the addition of HiredScore, that we just acquired, along with our Recruiting platform, our Talent Optimization platform, and our Candidate Engagement platform, it gives us the ability to deliver a full suite for talent acquisition around how we identify talent, how we engage with them, how we source or recruit them and then how we retain them for internal mobility. So I am really confident in our ability to deliver a strong ROI to the recruiting and talent organizations, with us having what I think now is one of the best full platform suites for talent acquisition going forward.

My take

Eschenbach declares Workday has “cautious optimism" about the coming fiscal year as he takes sole CEO charge. As noted above, yesterday’s numbers are a solid base on which to build. As well as its savvy AI investments and growth - both organic and inorganic - international expansion represents an opportunity, particularly in EMEA. International revenue now makes up 25% of the total, but as Eschenbach noted actually represents half of the firm’s addressable opportunities, so there’s a lot of room for growth here. Sarah Aryanpur will be picking up on some of the firm’s international thinking later this week. 

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