Q1 2021 Earnings Call

[music].

Hi, all participants are in listen only mode.

We will conduct a question and answer session towards the end the call.

I will now handed over to Justin Furby Senior director of Investor Relations.

Welcome to workdays first quarter fiscal 2021 earnings conference call.

On the call we have Aneel bhusri.

Ill.

Cisco or co president and CFO.

Fernandez our co president.

Oh, good our vice chairman.

Well I prepared remarks, we'll take questions.

A press release issued after close of market.

Well this call is being simultaneously.

Some of our statements on this call, particularly our guidance based on the information we have today.

Forward looking statements regarding our financial results application.

<unk> operations and other matters.

These statements are subject to risks uncertainties assumptions, including those related to the inside the ongoing Tobin Nike.

Our business and global economic conditions.

Please refer to the press release.

Doctors and documents filed with the Securities and Exchange Commission, including our most recent annual report on form 10-K for additional information already.

Uncertainties and assumption that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call he will discuss non-GAAP financial measures, which we believe are useful supplemental measures the work days.

These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

You can find additional disclosures regarding these non-GAAP measures, including reconciliations to comparable GAAP results.

Our earnings press release, and all the Investor Relations page our website.

The webcast replay of this call will be available to the next 90 days on a company website under the Investor Relations. Please.

Also the customers page of our website includes the what's this wasn't customers an updated monthly.

Our second quarter quiet period begins on July 16, 2020, unless otherwise stated all financial comparisons in this call will be to our results for the comparable period about fiscal 2020.

Let me hand, it over to Aneel.

Thank you Justin and welcome to Workdays first quarter Slide 21 earnings Conference call.

Before we get into our results I want to express my sincere appreciation to our more than 12000 employees, who have responded in such a remarkable wait to support one another and our customers. During these uncertain times. This team continues to push forward across all areas of our business and I've never been more proud of them.

As we continue to navigate this period, we've stayed very focused on our core values as their northstar that means our employees come first always without exception.

I also wanted to express my sincere, thanks, and gratitude to our customers many of whom are on the front line and putting yourself in harm's way every day. Thank you from all of US at work there.

Over the past few months, we worked closely with their customers to configure their work they solutions to help them navigate new challenges and opportunities presented by this current environment. We've also heard from countless customers, who like us are using workday seamlessly closer books, 100% remotely so the first time ever.

Health care customers, they're relying on workday to redeploy critical people resources with great agility.

And we have heard from a planning customers were using our solution to dynamically adjust their financial workforce plans. In fact in late March we saw more than 30 ex increase the number of scenario models that are customers were running.

These are just a few examples where workday doesn't powered or customers to better navigate this challenging in fluid environment. Just report today's call we announced one more.

Worked in Salesforce had been great partners for a long time and now have countless joint customers when the pandemic kit.

Many had to flip to a completely remote workforce overnight closing offices schools services in more and others had a turn on a 24 by 17 at an instant.

HCM customers are leveraging the power of the dated workday as a source of truth to manage their workforces, which has included things like identifying a central workers deploying people with relevant skill sets more.

At the same time Salesforce has just announced work dot com, which is a powerful platform organizations to reopen safely administered logistics of returning to work.

So it only made sense to bring workday and worked I come together in a way that will simplify things for our customers immensely eliminating the need for reconciliation between Barry systems and more as they prepare their workforce a return to work safely and securely and this is just to start.

Now moving on to the business highlights from Q1, beginning with Workday HCM, where the journey to the cloud continue despite the challenging backdrop.

Q1, we were selected US core HCM vendor one of the largest city governments the city of Los Angeles.

Also welcomed a utility company in EMEA with over 80000 employees.

Well as a large insurance company in Asia Pac with over 50000 employees among the main new HCM customers in the quarter.

Turning to Workday financial management I'm pleased to say that we now have over 900 customers have selected us CIRCOR financial system.

We saw continued momentum in Q1, including a financials first when unfortunately 50 company Fannie Mae.

Other new financial customers included legal Jefferson County, Metro government popped up as well as a large helped her a company with more than 60000 employees.

Next the many financials go lives in the quarter I would like to highlight Lithia Motors race track.

We also saw solid demand for our expanding suite of products that support the opposite the CFO and the chief procurement officer on the planning front, we expanded our partnership with Microsoft So workday customers can run workday docket planning, Microsoft Azure cloud.

Microsoft become the first work they cost front I'm sure as they adopt more big Dr. planning to help them with the planning budgeting and forecasting.

Scott RFP had a solid first full quarter under workday with multiple fortune 500 wins, including its largest ever transaction with a large health care company and wins at Lowe's and Albertsons.

One of the many benefits of the cloud so we can deploy our customers, 100% virtually we showcased distressed through Q1 with more than 90 customer go lives in March and April.

Notably to these customers have more than 85000 fortys each.

Charging matheson in a p. J and John Lewis partnership.

Turning to product we delivered our latest major released in March which included enhance workforce planning with workday adopted planning availability of workday assistant and intuitive chat bots have gotten employees, new machine learning base skills capabilities to work. They yeah, I'm terrified current employees skills and supporting recycling efforts and new data visits.

Station and benchmarking features workday prism analytics.

In addition, we made great progress our extensibility journey.

Just this past weekend, we moved our latest offering on workday cloud platform workday extend gee.

This is a significant milestone cross that we further increases our strategic positioning with customers and partners. In addition to our powerful integration capabilities customers can now build deep extensions from work. This core applications. As an example, within just a few short weeks one of our customers built snap on worked to extend that helped facilitate hazard page their workers.

On the front lines.

I'm confident that this period, but ultimately serve as a catalyst to accelerate the adoption of our growing platform supporting each arm finance systems in the cloud now more than ever companies are realizing the incredible importance of having agile flexible systems to support their mission critical business policies.

With that I'll turn it over to our co president Chano Fernandez over to you China.

Thank you need good afternoon, everyone I like this thing a few minutes providing updates on the fifth.

Before I do that I would first like to thank you weren't tired go to market T cell responses setting.

No I may be biased I don't see that you have the best Justine enterprise somewhere I have never been more comfort that deep dive right now having watched what dancing gauge waste heat.

Yes.

Customers over the last few months.

I suddenly had mentioned there were many highlights this quarter, including the financials first winging April finding.

He was saying they steal once a conference center well for new products that will enable funny may account for.

No.

The median went there price team also had another outstanding quarter, continuing a multiyear trend we have seen seems seems but actually all of our knowledge.

I think on fees are really meant approach, we streamline cells that degree which has dramatically reduce the cost would be probably.

In addition momentum we thought were back to based team continued in Q1 will be Pursing blast Neil ACB growth.

Formats, we thought where box based game spanned across customer segments products, including core fee.

Now turning freezing.

It makes a newly C D coming from multiple customers being on the rise for us over the last few quarters, we continued to our resources to better target the growing installed base opportunity, we expect me to lenient.

What are you Eric.

We had to come see doubled sales momentum across all areas of the business entering F. White 20, well however is called 19 force.

Across much global economy, we still higher than normal deal push outs, but you've been running industries most.

Including traveler, hospitality healthcare or major geographies where effect.

What we saw a heavier impact our rest of world markets.

Making the decision to move onto working day has always been on a very strong E. One for companies one that has not taken.

Even the important on something that seashells spread the nature of the partnership we thought where customers in disconcerting environment. There a company stock car prolong the dots efficient process I stay focused first on when assessing responding the immediate impacts their business.

Hey, good Nielsen is that based on where we stand today most of the pipeline impact has been opportunities moving it later periods Robbins on deals that are going away. We said I guess expected impact being you do you see it's also important to note we have seen drilling prospects engagements in April we have also seen healthy.

Gross weight 22 separate Trinity shift from first half to both Q4, I mean Lifepoint 20.

Finally, we have adopted that were messy areas of focus by solution industry doubling down on the go to market. Most channels that we are confident with GE up the best returns science.

Wearing ACO baby market, but we feel very confident now were positioning so no meaningful changes to competitive dynamics.

In addition, our discounting was in line with historical levels. Most customers negotiations censored said I brought more flexible payment terms to help east initial upfront cost that.

We deal where customer relations. So long term partnerships on were willing to leverage our balance sheet, where we think makes sense.

We strongly believe that these unprecedented environment on the ascent. Thanks import that's a hobby seasonable cease then.

Execute ice.

I can't tell you how many prospects I have spoken with over the last few months left for me this environment.

Oh, yes prepare their legacy Rpcs, that's our rapid change.

The same time also spoken with many of our customers told me, Yes, I'll mission critical work being out in their business respond to these crises I have heard from many customers currently implementing we're experiencing a faster more product project.

Mold basis.

There are many potential I'll pass it will determine what the pace of recovery would look like.

Specs environment remain very it's really well that's why 21, yet despite some near term certainty were confident that asset recovery takes hold we're incredibly well well see I'm not sure wont be decade opportunity that.

With that I would turn it over to Robby.

Thanks, John and good afternoon, everyone.

Despite a challenging environment, we reported solid first quarter results, which we believe as a direct reflection of the mission critical nature of our solution I'm Gonna briefly recap our first quarter and provide updated guidance for if my 21, and then we'll open it up to your question.

We had our first ever 1 billion dollar revenue quarter in Q1.

Scripts and revenue of 882 million at 26% year over year and professional services revenue of 136 million up 10%.

Total revenue outside the U.S. was up 30% to 256 million.

Subscription revenue backlog was 8.19 billion at the end of the first quarter growth of 20% year over year.

Subscription revenue backlog there will be recognized within the next 24 month with 5.52 billion growth of 21%.

In Q1, our retention rates continue to be strong with gross retention over 95% and net retention, which include upselling at the time of renewal over 100%.

As John mentioned or add on business is growing rapidly and we see strong sales back into our customer base, both during and outside of the renewal process.

Our non-GAAP operating income for the first quarter was 130 million, resulting in a non-GAAP operating margin of 12.8%.

Helps support our employees during these unprecedented times in April we paid a onetime cash bonus equivalent to two weeks pay to all our non executive employing.

This added 79 million to our first quarter and full year F. White 21 expensive, both GAAP and non gap. It was not contemplated in the guidance provided during our Q4 call.

Excluding this onetime bonus payments, our Q1, non-GAAP operating margin would've been 20.6% well above our guidance driven by top line out performance.

Lower spend on travel.

Non critical program delays and more measured hiring.

Q1, operating cash flow was 264 million growth of 26% year over year.

During Q1, we successfully added an integrated approximately 150 net new employees, bringing our total workforce at the ended the quarter to roughly 12400.

And lastly in April we closed the 1.5 billion dollar credit facility comprised of a term loan under revolving line of credit, which we believe strengthens our financial position and provides us greater flexibility as we plan for the future.

At the end of Q1 500 million of the term loan had been funded.

Overall, we're pleased with our results and execution against a very challenging environment.

And now I'll turn the guidance.

When we provided our outlook in February was very early in the covert 19 crisis, and we could not yet reasonably predict or quantify the potential impact to our fiscal year.

And the 90 day. Since then we've started to see an effect on our business on several fronts, including new business bookings.

GAAP and non-GAAP operating expenses and cash collections from customers.

The updated guidance, we're providing today takes into account these impacts based on what we have observed over the last few months.

Significant near term uncertainty still remains however, so we're providing wider than usual guidance ranges help take that into account.

Built into our revised guidance, if the expectation that the pace of recovery will be relatively slow with Q2 and Q3 being the most challenging period, followed by a reasonable improvement in Q4.

Before providing our updated outlook I wanted to make a few high level comments around our business model.

First we primarily serves a large and medium enterprise market and although even the largest companies are not immune to the current economic environment. We believe there better position then SMB to whether this downturn.

Okay, well or licensing model is based on the number up workers within our customers organization. We have measures in place that help reduce near term volatility from employment changes.

As an example, our contracts it typically only trued up annually to account for increases and decreases in worker count.

In addition, our contracts have base minimum which limit our downside and it is only upon contract renewal, which is typically every three to five years that our customers have the opportunity to reset these based level.

And finally, we are very strategic to our customers, which makes our products incredibly sticky.

As a result, while we may see some moderation in retention rates in the near term like we do the increase bankruptcies and reduction in base worker count during renewals, we expected our retention rates will remain high and we will continue to update you on this metric as we move through the year.

With that as a backdrop, we're lowering our f. why 21 subscription revenue estimate to be in the range of 3.67 billion to 3.69 billion or 19% growth.

We expect our Q2 subscription revenues to be 913 to 915 million or 21% growth.

We now expect professional services revenues to be 500 million in fiscal 21, and 128 million in Q2.

As always our priority is to support our customers successful deployment and drive the highest level a customer satisfaction.

In line with these goals, we expect to balance approach in terms of partner and workday Prime to ensure our partner ecosystem continues to be healthy an active.

For Q2, we expect subscription revenue backlog growth in the mid to high teen.

Given the current uncertainty around net new business renewal rate.

Potential changes to contract durations during the remainder of the year, we will only be providing Q2 backlog guidance at this time.

Now moving to margin.

We estimate Q2, non-GAAP operating margin to be approximately 19%.

For the full year, we now expect to non-GAAP operating margin of 16% up from our prior view a 14.5%.

This margin improvement reflects our expectation of lower operating expenses versus our original plan, even as we continue to invest and position ourselves to emerge from this period as an even stronger company.

GAAP operating margin is expected to be lower than the non-GAAP margins by approximately 26 percentage points in the second quarter and 27 percentage points for the full year.

All right. That's why 21 capital investment guidance, excluding unrealized state is now 280 million down from our prior view, a 350 million a several large least real estate projects have been postponed.

We currently do not expect to invest any further in owned real estate during that's why 21.

That's why 21 non-GAAP tax rate remained unchanged at 19%.

We had strong operating cash flow in Q1, but we have received and continue to receive Chris from some existing and new customers for flexible payment terms.

As always customer relationships and customer retention or a top priority for us.

During this challenging time, we're committed to providing flexibility to those customers that had been hit hardest by the pandemic. So that we can emerge stronger together.

Our ability to remain flexible in the area of cash is critical in supporting these goals and we will therefore these operating cash flow guidance for the remainder of this fiscal year.

In closing, we're confident in the fundamental strength of our business model. The resiliency of our customer base and then the long term shift of HR and financial applications to the cloud.

We plan to operate with agility, while continuing to drive innovation to support sustainable long term growth.

With that I'll turn it over to the operator to begin the Q and a process.

Operator.

Thank you at this time, we will be conducting a question and answer session you.

He would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is and the question in queue you.

You May press star too if you would like to remove yourself from the Q.

<unk> using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please what we call for your questions.

Our first questions come from the line of Kirk return of Evercore ISI. Please proceed with your question.

Oh, Thanks, very much and hope you all are doing well or really want to ask a meal why she is still on the long drive contest on on Sunday, but I guess I'll keep it to.

<unk> business.

Thanks for now.

Sean you mentioned that yeah customers, obviously deferring decisions I'll pick up surprising to anybody is that just a matter of just business confidence in me in sort of managing budgets and can you talk a little bit about whether or not that conversations difference, if you're having HCM discussion versus the financial discussion or its more.

Yeah, it's more so it's pretty similar across both those.

The conference.

[noise] and on the 18 long since he's a good question, but I would say that so far we haven't seen a while these that sadly more or less busted deal there I called it in both cases, there is significant ROI that we the lever to or customers significant business benefits, but both of these are.

As you know very important assistance on the driver so that changed very like called financed situation.

It could be the need to have more agility platform.

Change.

Well, we seeing out what did they dice that no one area either ace Yang or frequency is decidedly more or less if I stayed in the near term white color.

Im sorry.

Oh.

Alright, great care.

Hi, Good place you got.

No in terms of the overall I think you asked about the pipeline.

Right.

Correct, yes. Thank you.

Yeah well.

You know certainly as we said I'm going to prepare remarks, our pipeline has definitely more around.

Casey that you don't push out what are too maybe that auction to price I'm really not significant no changes in the medium enterprise.

We say, we don't happy not to date that yet to really cool. These say you know accurately at this point in time.

Definitely this is something that might during this carefully monitoring.

If I could give us one quick follow up you mentioned, but back to the case growth is really healthy you this quarter and I'm just curious given the fact that there's some your customers might be pushing back no bigger decisions for now you are you able to sort of toggled the salesforce to focus maybe more on this back to base opportunities within.

In your existing customer base, you would seem but the hit rate on those might be a little bit higher until some of the uncertainty dies down thanks very much for taking the questions.

Yes. Thanks for your parents as you know we already did significant investments at the beginning of each of the year to prepare for you covered it did decline the box to the base because we have hobby customer base that great such that well desk at U.S. solutions will definitely duckie Brown, what's already increasing so we felt that were so it's very would prepare for it as we said we had a good.

Girls in Dr. Bates customary in Q1, but we also had the same.

In Q4 as well so we seek to prepare for that that market Moshe.

If I could just had one one or one comment to lots of kirks question.

No. We did go through a similar environment with Oh wait in a way to nine and we.

We really focused in on a couple of things one was a quick payback for for customers and rapid implementation.

Goals, where we could get each are up and running.

In six months and financials, maybe the in a little bit longer than that and we're just dusted off that playbook and using it again said for for the net new business I think that's important to recognize no.

It's it's a very similar to what we don't I'm from that perspective, and there is there's a way through it.

Thank you all.

Our next question something of a Lion Keith Weiss of Morgan Stanley. Please proceed with your question [laughter].

Excellent. Thank you guys for taking the question and and everybody is safe and healthy out there.

A question for I think I had a China or Neil.

One of the thing that I get asked a lot by investors is the priority for core ichi any core financials, when we get to the other side to discovered 19 crisis, you talk to us a little bit about sort of the the conversations you're having with your customers on where they think sort of de DCM investments in financials investments well.

Fall on their kinda priority or stack. If you will once the spending opens up against what those IP budgets I'll start to get spent again.

Well I think first and foremost on the finance side I think this this crisis will be a catalyst for people switching from on premise into the cloud for finance up and we're already seeing.

The growth rates, but into the growth rates at healthy levels, but I've talked to watch the CIO. She said you know I wish I had everything in the cloud right now I I'm struggling with my on premise, both because of the labor required and people required to be on site and because of systems are really not very agile we're flexible.

And you know I, we see our customers coming up with new reports with.

New work streams. All these things that they were able to do an workday. So I think it's gonna be a high priority on the finance side on HR Oh, you know each arc is going to continue to be healthy I think what we're going to see is.

A growing emphasis on.

On the on the.

Area of skills the skills cloud learning.

Tell it marketplace all the areas, where we're going to have over 30 million people unemployed. We've got to get these folks back to work and we got to get them.

We got to get them, the right skills and I think a lot of companies are gonna be working probably alongside.

Some of the states and local governments to direct how to get these get these folks back to work and and that will that we'll be right up our sweet spot.

Tony what I think.

No.

And then a press one follow up for for Robin.

First of all Super pool, all of you guys to get that Boeing installed the employees public you up with the Morgan Stanley CFO and maybe you guys could have a chat [laughter], but nonetheless, the full year operating margin still come up versus your prior expectation definitely from what we had in our model how should we think about like in makes a lot of setting.

Right, there's no travel going on in a lot of events are coming out of that equation. How should we think about the durability of that margin gain that 60%. If you will as we move our model forward indefinitely 22 is that new base and then that's going to grow from there or is just a more a temporal step up.

You know that's a great question, Keith and it's given all the unknown that we're facing right now it's really hard for us to look into F. why 22 at this time.

And we certainly do plan as we start to see recovery.

Particularly in in Q4, hopefully that will continue to invest in the business, though I'm not sure did this is the new baseline, but you know we certainly believe that we are showing the the value of our business model and how it can leverage as we scale, but we still have a lot of important work to do.

And we've got a long term you know very massive opportunity ahead of us that we will continue to invest.

Got it excellent. Thank you guys.

Our next question some from the line of Heather Bellini of Goldman Sachs. Please proceed with your questions.

Great. Thank you so much for taking my question and hope you on your families are all doing well I just had two I was wondering if you could talk to us about how your salespeople and your partners are you know kind of dealing with lead Gen. In this environment kind of how how they adopted if there's if there's some stuff you could share.

That's there on on.

My being creative on that front, and then Robin I know this isn't something that you normally commenting on anymore, but just given the environment in your comments about twoq and Threeq, you being up probably even more challenging quarters that you're going to face any high level comments, even about how to think about unearned revenue trends for for that for the July quarter.

Thank you.

Yeah, I'm Heather so.

I think we definitely expect that honor and will lag behind our backlog growth right and we'll continue to do that and.

Part of that has to do with the fact that you know, it's kind of and I. Both both mentioned, we're trying to be more flexible on cash, particularly for customers that have been most impacted and try to mention that a lot of his new customer negotiations really that's what they're pushing on.

So we really want to use our our balance sheet to help them out during this time and so as you know that will impact the.

Billing and the unearned as well as the cash flow and you should expect to see that throughout the rest of this year. The good news is that actually doesn't impact our revenue recognition profile.

I think it's a it's a good investment and that flexibility has and we believe we'll continue to allow us to maintain our discounting levels.

Hi, there in terms of there. Thanks for your question I hope you're doing well.

So how see too in terms of your question on the management, we're still seeing obviously you had two people. It during the course of Q1 to a full U verse, while environment, but the reality is that we have always had a pretty significant portion will fall where sales cycle does virtually any.

Switching grabbing the process both show on Tuesday morning of our software and so we'll have to change that we have the entire process there 20.

In terms of what we had that say satellite. So my remarks, we had I see that were meshy I rational for whose by some assuming industry I would leave published more than doubled doll.

Let's go to market motions that we have more confidence that we guilt best returns you're in D. Science I'm, obviously, you kind of seeing came up with some more and solid surging industries, forcing some solutions like it could be flattening or freezing.

Good morning Scout South emotions that we've seen will produce better results.

Great. Thank you.

Our next questions come from the line of Mark Murphy of JP Morgan. Please proceed with your questions [noise].

Yes. Thank you all had my congrats I am interested in how you would characterize the environment. So far in the month of May.

Just in terms of generating pipeline in booking new business. It should we think of that as being kind.

Kind of a night and day difference versus late March early April or.

Is it something you'd call directionally, better, but it'll still kind of take some time to get back to the.

Original plan. So I'm just trying to understand a if you think it's improving or degrading kind of lit between late March and the month to me.

Hey, Mark.

70 days.

But we're still below our normal engagement levels.

So we don't know more pipeline built.

But there has been a significant seeking engage being plus 50 cent demand relative to I would say four weeks. It go.

So much about where activity as a city now focusing a set of industries, where were seeing the greatest near term demand.

We also Valentino dialoguing verticals that are more impacted by called me to ensure that what plus he.

As we emerge from this environment Clark.

Okay, and then as a follow up Robin I'd say, it's understandable that did your withdrawing the subscription backlog I got into the back half.

But that said just considering that you still landed essentially within the original Q1 guidance for subscription backlog I think surprisingly and during a real chaotic period of time is do you see high audits that that backlog growth is going to end up.

Say materially below this type of glide path that you're on or its the constitutes a little better than that but it's just kind of such a wide range of potential outcomes. At this point that it's hard to know yeah market.

Let me.

Let me just let me let me start let me start with this I think what everybody needs are recognized is that no. One knows how it's going to play out over the next couple of quarters. You know, we don't know if there's going to be another outbreak.

And so.

<unk> everything that we are saying is our best information at this point in time, Keith I mean.

Did you know how it's going to play out. Please let me now [laughter].

So with that you know Robyn jump in but but I think I'd have to be the backdrop on on everything right now.

That's right and as you know that backlog is tied to net new it's also tied to renewal and then it type situation.

We really haven't seen.

We've got enough data yet to predict the play out over the back half of your because we just have far less visibility.

Sorry, sorry, I realize that was mark sorry, Mark.

Yes.

Let me tell me Keith it's not good I Hope you will [laughter] take care you. So.

Thank you. Our next question has come from the line of Kash Rangan of Bank of America. Please proceed with your questions.

Hey, Thank you very much I'm curious that are that the net new ACB growth of 50% within your base, how does that compare to a recent quarters and how sustainable is and also curious what kinds of products are you having the biggest betray quick wouldn't the installed base. Thank you so much.

Well look a lot channel answer the first part I would say that.

It's a lot of the not surprisingly the customers that are adding or adding onto core HR in court finance.

In this environment and Tom can come on a comment on as.

Both planning and.

Scott RFP have been very strong solutions or people are are really struggling with legacy planning tools and you know I mean I even look at work there how many plants we generated in the last couple of months because no. One knows how this is all going to shake out.

What's got RFP. It's a quick it's a quick implementation that can get you can get in control of your of your spend in.

You know very global and unified way and that's another thing that that's been doing well, but maybe I'll, let Tom comment and then shuttle comment.

Yes, Thanks, Neil that's right what we've seen it real uptick in interest implanting companies are running as you would expect significantly more scenarios is as a meal said.

I think there was a period of time in March we saw about a 30 ex increase.

In terms of number of scenarios that our customers are running so it's not surprising so I think the importance of planning it typically cloud based solutions, where the whole team can be conducted holistically.

He has resonated with customers, we've seen tremendous interest of workforce.

Everybody's thinking through what the next generation workforce looks like there's obviously fundamental changes being driven to both location and the the way we work and that requires a focus on workforce planning up and then as Neal mentioned I think we've also seen a lot of interest in our source you probably.

Oh because periods like this companies are extremely focused on ways stuff. We can save money. All you know as Charles mentioned in his script, we had the what we saw the largest steel Edberg Scouts history. This quarter. So I think there's a lot of resonates with customers.

Yeah, we're seeing that uptick channel.

Just listening to Tom it sounds like the <unk> Baby <unk>. This is the case or maybe just not because the shift a cloud based financial.

Could accelerate course Corbett is that right or are too optimistic.

Well I think I think generally no and there's a lot written about this period of time accelerating trends there were already in place and certainly the trend towards a cloud based applications.

The need to and how effective it is during a period of time like this where people have to work remotely.

You know as is traveling others have stated there's uncertainty in the short term in terms of yeah, what the uptick in terms of adoption of enterprise applications will be in the short term, but there's no question in the intermediate and longer terms of that they'll be chat wins towards the adoption of cloud based comp.

Well in place planning and cloud based applications more generally.

Thank you got all cash we've seen the defeat deeper same last set new ACB girls that back to baseball showing for Q1.

That's destiny that Werent disclosed so far I don't think DC.

She said I'll panel.

Hey, we having a happy customer base that certainly the investments we Don when they go to market motion to call there.

Our customer base I ask when of course, they increase a little there so do skill set.

That suddenly see more freight that we have seen workday.

Thank you. Our next question is comes the line of Brent Bracelin Pfeiffer Sandler. Please proceed with your question.

Thank you and not good afternoon I wanted to follow up on common Microsoft relationship I know you guys first announced the global partnership back in the summer 2016. So my question here.

What what how is that Microsoft relation ship evolved over the last three plus years and maybe the new scope of what you're working with them on today.

So we've had a great partnership with Microsoft for a long time.

<unk>.

Really around Officethree hundred 65, and more recently around teams and this was built on that.

Adding YOD.

As you're into the mix right now just for just for adaptive.

But that's it's also the first time that Microsoft has become a.

Workday customer all the linked in its been a work the customer for quite some time. So just having a it's just the natural progression over partnership or I think.

Works also great companies such as a great. So you know you know we'd like to do more with them.

Awesome and then just a quick follow up relative to the concessions that you're giving some of the most heavily impacted customers I know Robin you talked about the base minimum or not really being up for negotiation every three to five years, but I. Just wondering are you proactively looking to kinda work with these customers that are.

Are impacted or is it something where it's non negotiable and you really don't really see a change there and until that is up for renewal.

Brent I mean, we were taking all look better customer request on a one off one by one basis case by case, but really the vast majority of the quest forgetting or along payment deferral, not renegotiating contracts, but just deferring payments. So we have not really run into an issue with customers trying to arena.

Okay base level the time, although certainly that couldn't be case some that are.

Most.

Most impacted by that.

Got it makes sense. Thank you.

[laughter]. Our next question has come from the line of David Hynes of Canaccord. Please proceed with your question.

Hey, Thanks, very much guys. Congrats on the results maybe I'll take the other partnership question and Yoki can you talk a little bit about a more about work dot com, what you're doing with salesforce when it could mean for workdays business and maybe how you see that opportunity evolving over time.

Can you get to me.

Sorry.

You know Mark Mark has been driving.

The contact management piece for for sometime around a contact tracing.

And.

And you know, we actually had started that thinking in that work all the way back to Sars. So.

And the Salesforce applications. The other day as a content management, Oh, sorry contact contact management application. So it's really well suited to that Mark has the same goal and Phil first at the same goal that we do we want to enable our customers to.

Get get their people back to work safely and so what we're doing this we have all the data about employees locations.

What their what there.

Learning in terms of them the learning content and Salesforce has a whole set of things with worked dot com around contact tracing.

Right and skills shifts and we're just making sure that the two technologies are completely six so customers don't have to reconcile between the two and interview and so if you're a joint customer.

Hopefully this the solutions really going to help you manage your way back into the office.

And as I think.

All of you know wonderful and I mean, Salesforce has been one of our best partners, it's not our best partner almost since the day, we started workday.

Sure.

Okay. That's helpful. And then maybe a follow up front for Robin. So a few folks have hit on back to the base strength in the queue and Anna and I, just want to tie that into net revenue retention.

<unk> gross retention has always been really strong right that 95%, but on the net side.

He is the consistent commentary about north of 100% just out of practice or are you actually seeing improvement there and I guess could you get anymore granular on on a number for net revenue retention.

Yeah. The way, we actually measure net revenue if we only count add on sales at the renewal point and so now that we're really focused more on selling back into the base and that's happening during renewal cycles, but it's happening a lot more than ever outside of renewal cycle and that's not captured in the net retention rate. So okay. So I think it.

We're actually looking at a better way to measure it now that we're doing so many.

Add ons outside of renewals and we'll probably make a change there over the coming quarters, but you know for now I would just think of it as long as the way we are calculating it remains over 100% that's great news and then on top of that we're selling a lot more into the base outside of those renewal cycle.

Right, Okay that makes a lot more sandy disguise Dizzy I'm going to ask I'm going ask Pete slump, our head of applications to weigh in on the Salesforce partnership to he's closer to the to what we're actually doing from a product perspective, Peter it'd be great.

[noise] [noise] [laughter].

[noise] [noise] [noise] [noise] Pete Pete your your.

You are I think your your volume is.

Not on [laughter].

Better.

Got you have to your but you need to eat them you do basically got it.

So think of the two.

Salesforce has the data about the workplace and workday has stayed about the workforce and some of the most rich data that we have is a is data about skills.

So as companies are going through these big transformations that are happening with workers with also some demands in certain areas that they didn't have before and vice versa are being able to make those transitions quickly and use that skill data. So essential so when we think about getting.

Companies back to the workplace safely securely and the people boxes went to curious about the data, bringing these two datasets together about whether that's in Salesforce is.

And your command center in the worked on on command center or whether it's within the work the application set itself and that's how we're going to and that's how we're going to really start things off as with the data integration and then develop more applications as we go forward.

Okay got it makes sense, thanks to all the color.

[noise], we have time for two more questions.

So.

Question comes from the line of Scott Berg of Needham and company. Please proceed with your question.

Hi, everyone. Thanks for taking my question I only have one here in essence of time.

Aneel or maybe China, probably Neil just wanted to see a if you had some additional comments on workday extend now that it's a finally available in G.A. trying to understand the revenue model will be going forward kind of how is it evolved today versus the initial no less than two years ago, and and do you envision customers.

Or other companies building commercial labs, certainly could actually sell off of it like what happens on for sat Com [noise].

Oh, well I'll take a quick crack that I'm just send it over to Pete.

Hopefully p. gets a technology like the club.

[laughter] season Pete.

So work they extend is really focused on extensibility for our customers.

And we're not looking to open up.

Hi can I ask me community to build commercial applications, our customers are getting great value from extend I mean, we had extend and.

And limited availability limited general availability for several quarters and so we really got a good handle on the use cases and now we're seeing customers doing is building I call them or Minneapolis, ER and extensions they've done a lot or a lot of it around kobin 19, whether it's to track essential workers to track one of the one of our customers.

Oh, it's tracking cases.

Hope it around the globe for manufacturing plants. So it's it's a it's really whatever the our customers wants to do with and extend our business model, but definitely not ice vsan and p. what else would be what else should we add to that.

Thanks, Neil you take that have them you think figured out here after working from home for the last two months.

The.

Really I think the success, we've had so far I like 50 50 customers using it over 90.

Ah different solutions built on the err on the platform already and we're going into the is this just curious with a lot of existing momentum as we think about the products we think about.

Really extending.

The entire uses the entire surface workday.

All the applications that we haven't worked and then enabling our customers.

And so we continue to open up.

Surface areas.

[laughter] the different possibilities that customers can develop on.

[noise] and I guess I guess, it just to come back to the to the revenue question or the bookings question I still wouldn't expect much for fiscal year 21, but I do think it can be a decent contributor in fiscal year 22 and beyond.

No not at a high grow into high growth high growth contributor.

Excellent. Thanks for taking my question.

[noise]. Our next question is coming from the line of Brian Schwartz of Oppenheimer. Please proceed with your questions [noise].

Hi, Thanks for taking my question Chano I had a follow up question I think it was to have there's about that marketing fine on the lead generation I'm you commented on what the timing could be for these sales cycles, but can you shed light on what youre, saying in terms of the values are the deal values holding up at a similar rate.

As you've seen in the past as they are progressing through the final towards closing thanks.

[noise]. Thank you for your question Brad.

Seems very early days.

Seeing no shift.

She comes to comment all set any when a monty talked the pipeline coming for hi, there nature I want to this year.

Pipeline coming in from if White 22 at this point in time be happy we bought it just went to 25 cents.

Box deals in terms of value even loved environment. We are in due course thing we need to be able to progress those deals finally closing, but nothing to highlight intensive change don't steel side, there, but you see there.

Do you know the are shrinking or already having this ratio.

Kind of things like dose that no Brady, we need for definitely I think they're trained more data points isn't that wrestle Q2, Q3, but right now that's what I can share right.

Thank you very much.

Ladies and gentlemen, thank you for your participation on today's conference. This will conclude work that's first quarter fiscal year 2021 call. Thank you again for joining us and have a great evening.

Hi, Pete you can and you can I'm you know.