Q2 2021 Workday Inc Earnings Call
Ladies and gentlemen, thank you for standing by our conference will begin shortly once again. Thank you for standing by our conference will begin shortly.
[music].
Welcome to Workday second quarter fiscal year 2021 earnings call.
All participants are in listen only mode.
Okay, Dr. question and answer session towards the end of the cool.
With that I'll now hand, it over to Justin Furby Senior director of Investor Relations.
Welcome to work days second quarter fiscal 21 earnings conference call.
On the call, we have aneel bhusri or co CEO.
Fernandez our co CEO.
Robin Cisco, our president and CFO.
But again, our vice chairman.
And Peach, Liam Burke Executive Vice President the product development.
Following prepared remarks, we will take question.
Our press release issued after close of market and is posted on our website, where this call is being simultaneously webcast.
Before we get started we want to emphasize it some of our statements on this call, particularly our guidance are based on the information we have done today.
Include forward looking statements regarding our financial results applications customer demand operations and other matters.
These statements are subject to risks uncertainties assumptions, including those related to the impacts of the ongoing cobot 19, pandemic owner business and global economic conditions.
Please refer to the press release and the risk factors and documents, we file with the Securities and Exchange Commission, including our most recent quarterly report on form 10-Q.
Additional information on risks uncertainties and assumptions that may cause actual results could differ materially from those set forth in such statements.
In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful supplemental measures of workdays performance.
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 in our earnings press release and on the Investor Relations page of our website.
The webcast replay of this call will be available for the next 90 days owner company website under the Investor Relations like.
Also the customers page of our website includes the lifted selected customers and its updated monthly.
Our third quarter quiet period begins October 16th 2020.
Unless otherwise stated all financial comparisons in this call will be to our results for the comparable period of our fiscal 2020.
With that let me hand, it over to Aneel.
Thank you Justin and welcome to Workday second quarter fiscal year 21 earnings Conference call.
Police report that worked at delivered a strong second quarter with healthy demand across all products areas a geography is.
Despite the challenging environment our success as a company continues to be driven by the Ford thinking companies don't expect more from their enterprise applications and she was workday as their partner for finance and HR.
I'm very proud of our workmates across the globe came together in such a remarkable way and mostly working from their home offices to drive the strong Q2 results.
We're obviously litigant unique terms simultaneously now beginning and healthcare crisis, and economic crisis and social crisis.
This year will no doubt be one we remember for all of our lives.
It's also a moment in time that businesses and the leaders are in a unique position to drive change pretty good and demonstrate that companies can and should have a so.
So that ends we have taken a leadership role in addressing social inequality, continuing to drive diversity and inclusion at work.
Help move US forward, we've recruited some of the most passionate and brightest minds from across workday.
An accelerator team guided by our chief diversity off surcharge here, we are for guiding principles.
Number one building inclusive products and technologies number two hiring a developing diverse talent number three cultivating a culture of blogging and number four strengthening our communities are accelerator team is focused on helping us identified priorities are metrics.
Help us drive and measure success against these principles, we look forward to updating you on are progressing on your future.
Moving onto the business highlights we had another strong quarter for workday, It's Jim where the migration to the cloud continues with notable customer additions, including early Keith I'd be state of Oklahoma and General manufacturing leader decent group.
I'm also pleased you mentioned that we added one of the largest U.S. telecommunication services companies to where fortune 50 customer west.
And there's always customer success remains a key differentiator for workday.
Q2, we had several it's Jim go lives, including General Motors, the Hartford, Eli Lilly Bridgestone Americas.
Turning to Workday financial management, we saw continued strong momentum across expanding product line in Q2.
During a financial's first when that Comerica bank and notable platform wins were company selected both core financials and HCM together, that's sharp health care amenity collective and American financial group.
Among the many core financials go lives in the quarter I'd like to highlight Prisma helped in Nebraska medicine.
In addition, CFA and shelter insurance, both went live as early adopters of Workday accounting center, new offering that a serves as a key differentiator in several of our recent strategic core financials webs.
Im pleased to say that Workday comments center is on schedule to be commercially available. This fall.
In addition to the strong commercial success. This quarter. We also added a federal government agency with 4000 employees as May seven financials customer and this agency is partnering with us as we seek fed ramp authorization.
And Dave for many years, we are providing solutions for state local governments as well as numerous federal labs and deal de contractors and we view the total market as next logical step in our market expansion. Our near term focus is on ensuring success with this initial partnership but we're excited by the longer term opportunity to serve the federal marketplace.
Turning some of our newer initiatives, we once again saw solid demand for our expanding sweeter products that support the office of the CFO and Chief procurement officer coating Workday adopted planning presume analytics spend management.
Where we now support more than 1000 procurement customers.
Scott RFP had another excellent quarter as companies are increasingly looking for the ability to get their arms around the supplier network and appreciate the rapid time to buy that solutions like shell to provide to them.
Indeed, the three fortune 500 sourcing wins that we announced last quarter are all now lives and in production.
Turning to product development in Q2, we announced availability for workday help and Jones, new solutions that extend the power workday people experience our machine learning driven employee experience. In addition, we announced availability of people analytics, which leverages, our Prism Foundation help empower HR business leaders to make better people.
Decisions. We also continue to help our customers with a return to work planning during this time, including joint offerings with key partners.
It's as you now so we had last quarter with Salesforce by the way congratulations on the great quarter Mark.
More recently with IBCM, where we announced availability of a joint solution to plan schedule and monitor our customers save returns in the workplace.
Last earnings call a share my belief that this environment will ultimately serve as another catalyst accelerates the adoption of finance and HR systems in the cloud. Our Q2 results of my conversations with business leaders suggest that companies are increasingly realizing the strategic importance, having agile flexible systems to support their mission critical business processes.
Now in the future.
Lastly.
I want to end on the exciting news that my great friend and colleague Chano Fernandez has been promoted to co CEO of workday.
His expanded role channel will now oversee all of our customer facing activities, including sales customer services and support and many aspects of marketing.
John Workday back to 2014, as our president of EMEA. This taking on more and more responsibilities over time, most recently as co president of the company.
He is an amazing values based leader and has driven US teams great success over the years, so move to co Ceos natural progression for him for workday and for me.
I'm personally thrilled to be as partner for this next chapter of Workday and for those of you have followed worked here for a while you will hopefully remember that my co founder, Dave and I operate as co Ceos for almost five years and the model were great for us and for the company.
Wholeheartedly expect the cosio structural also worked great for China When me, Congratulations China and a big Thanks to you and your team for a great Q2 looking forward to being your partner for many years to come over to you.
Thank you Aneel I incredibly grateful to yourself days on the entire board for the Trust you have placing me, it's a mono and partner with you what exceptional workmates cost adult all now were exciting journey ahead.
Before providing my update I wanted to begin by eight point on his comments I Express my stinks and appreciation to our sales team for a strong Q2.
I am pleased with our progress, especially into context helps the ongoing macro uncertainty and it was good to see this solid performance across our segments Reagan's products.
Many businesses seem to be settling into these asserting environment and increasingly realizing the need to move for what we've said Doug transformation initiatives. These along with our strong execution drove improving conversion rates in Q2 relative to what we experienced in the March April.
Thanks.
Our second quarter performance was broad based on included a strong results from both new box. The base stands in the large enterprise, we landed nine new real wants to follow seeing H.C. and customers.
Let the Celsion beans deals.
We also saw strength.
Patient and government team highlighted by doing that the state of Oklahoma, and we have a growing pipeline state and local government opportunities.
The medium enterprise also had another solid quarter, continuing a multi quarter train.
From our rating perspective, North America, Netbacks were standouts, and we had improving performance in Europe.
The box to based team delivered another solid quarter, we feel were 50 or seen growth again, this quarter driven by your strength across products, including morphine workforce on financial planning or using analytics leavening Scout RSP newly launched koning.
Center.
It's early but we're also encouraged by pipeline creation from some of our newest products, including help work they extend people analytics.
Going forward, we remain cautiously optimistic that market dynamics will it's not wanting to as we approach your.
Hello.
22.
More importantly, we are extremely optimistic on the longer term opportunity that we khan from these embark.
As a business is increasing and realize the importance of warranty navigating striving signs of change.
With that I'll turn it over to our newly minted precedent robynne sisco, congrats throbbing over to you.
Thanks, John ill I look forward to continuing our partnership supporting you in your new role.
As a meal in China. Both noted Q2 was a very solid quarter. Despite an uncertain environment driven by strong execution against a slightly improved market backdrop as many companies continue with our digital transformation initiatives.
Im going to briefly recap our second quarter results update our guidance for Q3 unemployed 21, and then open up for your question.
Subscription revenue in the second quarter was 932 million up 23% year over year.
The outperformance was driven by strong renewals favorable new business linearity and a onetime benefit of $6 million from the acceleration of revenue on a customer contract.
Professional services revenue was 130 million and total revenue was 1.62 billion.
Total revenue outside the U.S. was 257 million, 24% of the total.
Subscription revenue backlog was 8.6 billion at the end of the second quarter growth of 22% year over year.
The backlog performance was driven by strong new HCV bookings across both net new an add on business.
In addition, we once again experienced strong renewals with gross retention over 95% and net retention, which include upsells at the time of renewal over 100%.
Subscription revenue backlog that will be recognized within the next 24 months was 5.78 billion growth of 21%.
Our non-GAAP operating income for the second quarter was 258 million, resulting in a non-GAAP operating margin of 24%.
The operating margin outperformance was driven by a combination of topline overachievement slower hiring continued covered related moderation of operating expenses, including travel in marketing and some onetime credits related to cancel the events.
Due to operating cash flow was 157 million growth of 57% year over year, driven by solid collections and moderated spending.
We continue to work with customers, both new and existing that request more flexible payment terms, specifically in industries hardest hit by the pandemic.
This payment flexibility acts as a near term headwind to cash flow and unearned revenue. So it's important to keep in mind, but it has no impact on our subscription revenue subscription revenue backlog or long term customer economics.
During the quarter, we settled our 2020 $250 million convertible notes using cash proceeds from the final funding of our term loan.
We exited our second quarter 2.8 billion of cash and marketable securities and have access to 750 million of unused capacity on our revolving line of credit.
Our total workforce at the ended the quarter was approximately 12300 employees slightly down from Q1.
Hiring in the quarter was focused primarily on a limited number of strategic positions to support our key growth initiatives.
This was offset by normal levels of employee attrition, but have not yet been back filled by the end of the quarter.
We're extremely pleased with our results and execution in Q2, and while we remain cautious on the near term pace of recovery, we see significant long term opportunity ahead to support our growth aspiration.
Now turning to guidance, which despite our outperformance in Q2 continues to be governed by the assumptions, we outlined last quarter.
Specifically that we continue to face an uncertain and challenging environment, which we expect will remain in the near term with only slowly improving market dynamics as we approach year end.
As a result of our strong Q2 performance, we're raising our F. right 21 subscription revenue estimate to be in the range of 3.73 billion to 3.74 billion, 20% to 21% growth.
We expect our Q3 subscription revenue to be 948 to 950 million 19% growth.
We now expect professional services revenue to be 525 million in fiscal 2001, and 135 million in Q3.
As always our priority is to support our customers successful deployment and drive the highest levels of customer satisfaction.
In line with these goals, we expect a balanced approach in terms of partner and workday primes to ensure our partner ecosystem continues to be healthy and active.
For Q3, we expect subscription revenue backlog growth in the high team.
We estimate Q3, non-GAAP operating margin to be approximately 19%.
For the full year, we now expect to non-GAAP operating margin of 18% up from our previous view of 16%.
This full year margin improvement is largely the result of our top line over performance.
GAAP operating margin is expected to be lower than the non-GAAP margin by approximately 26 percentage points in both the third quarter and the full year.
Our first 21 capital investments guidance remains unchanged at 280 million.
I'd like to close by thanking our amazing employees customers and partners for their continued support and hard work, which allowed us to deliver strong Q2 results. During these unprecedented times.
Our first half performance has reinforced our confidence in the fundamental strength of our business and the long term opportunity that we see ahead.
With that I'll turn it over to the operator to begin today.
Operator.
Thank you we will now be conducting a question and answer Sasha.
To ask some questions. Please press star one on your telephone keypad.
Confirmation telling will indicate your line is in the question Q.
You May press star to to remove yourself from the Q for participants using speaker equipment and may be necessary to pick up your handset before pressing the star Keith.
One moment, please while we pull for your question.
Okay.
Our first question was comfortable line occur return of Evercore ISI. Please proceed with your questions.
Yes, thanks, very much congrats on the quarter and congratulations to shawna on the promotion.
Well deserved.
I think my question is for Neil Neil I think there's some concern amongst investors that companies that were in the more traditional or back office categories, a software, maybe namely HCM and ERP would get shifted the back in line in terms of spending priorities due to Cove, Ed and I think with these results that thesis was clearly a bit faulty so I was.
Wondering if you could talk about how customers are thinking about workday relative to their other mission critical systems in terms of privatization around spend and then why the conversations you're having today, maybe put you into different category versus some of the traditional ERP vendors. Thanks.
Thanks for it so first of all I think the most important pieces were not an ERP vendor I think there's a lot of conversations with the ERP.
That are two to three year implementations that.
That the payback takes a long time, where were quick to implement HR and finance systems.
Really oriented towards employees and running the business and in a very agile environment. So on the HR side very simply.
With the pandemic and with all the other issues facing companies right now employees are front and center for everybody and you should think about HCM not just as a.
Back office systems, but an employee engagement system, but also with the pandemic companies that had to change their business process is radically changing.
On a weekly basis and the legacy systems, just can't do that so.
So we saw some holdouts of companies that were working with legacy systems decide hey, we just need to make the plunge and go into the cloud even though we're in the middle depends on it.
Similarly on the finance side.
The flexibility that starts let's start their planning system the ability to.
Recreate a generate plans on a on a really rapid basis based on the system adaptive that can go live within a month.
And our core accounting system, where you can close the books without having anybody in the office completely remotely can be live in six to nine months and so I think.
Thanks.
Companies that are in a place to investor continue invest and this in these data transformation areas.
And there are embracing the cloud and.
Let me turn finance are still very important.
If I get us just a quick follow for Robynne Robynne you mentioned, obviously that most the outperformance on margins will serve due to the outperformance on the topline.
Or the change in guidance, rather was due that outperformance on topline you in the back half the or do you expect to accelerate spent to accelerate hiring rather and and how should we think about sort of your your ability to raise to spend more in the back half I guess are higher more in the back half. Thanks.
Yes, So we said in the last call that we do expect to see slow improvements in Q4. So we've been planning all along to start reinvesting in the back half of the year.
And we continue to have that assumption. So we will start investing in areas like sales marketing product and technology and as I mentioned before we did have some one time benefit in Q3 that will eat.
As you know credits for canceled event. So we feel very good about our ability to invest in the back half the year and execute against this investment plan and Didnt pay off from that.
In the future.
Thank you.
Okay.
Okay.
Thank you. Our next question is coming from a line of Kash Rangan of Bank of America Merrill Lynch Merrill Lynch. Please proceed with your question.
Thank you very much congratulations on the work 15, when a fantastic quarter and congrats on your channel on your promotion.
Just for you any of our channel whoever wants to take this.
As you look at.
The causes workday, rising which has tended to be big event.
Yes got together.
Serve as a great opportunity for building a pipeline how are you thinking about kind of 21, assuming that kind of declining as it's going to be just fine.
As far as the forward looking.
Smith to build a pipeline for next year's business initiatives and also if you can just spend a minute on.
Even picking up in the field that there's pent up demand for integrated HCM financial system of the cloud that if you didn't do it.
Got stuck as opposed to customers. So how are you seeing that in your pipeline in what is the is the adoption of financial center related with HCM and the Fortune 500 segment in the market.
Is that poised to accelerate in calendar 2001. Thank you so much and congrats.
I think China was the right person to answer those questions. So.
The first to the thank you and co CEO. Thank you cash Knightswood Iceland [laughter].
So from from a rising perspective, you are right. We made the decision to feel it's on hold off rising up to next year, which is hopefully safe to get to video game. Instead, what we're doing you seem to have you seen especially on the that event that we as explore it most pressing challenges facing businesses right now, which we seeing is more appropriate at this time.
But I would latest went to highlight that rising.
The pipeline build there for us it primarily all yes, there is customers. Some later stage prospects cash.
From a pipeline perspective kind of looking out to next year, we've seeing improvement relative to what we saw in Q1, which is encouraging and we're moving closer to treat called levels, but we are in jet flight back these from a pipeline perspective.
With the biggest impact here have been different because we already called out.
Level as we thought at the retail but.
That is what a lot of areas I'm very encouraged by insurance will fight they built like what we're seeing a state and local government vertical and so services technology media a more broadly upward installed base. The pipeline also dot once.
Synergies Fostera, which can also may be helpful for year end, plus there have been stuff I'd say to support.
In the state or debacle just this year.
Out of the financial sub pent up demand, possibly.
In essence, HCM and the Fortune 500 sites for the market if that is the case.
What we're seeing great no financials.
You talked to some of our partners on we're seeing direct cancer cells. There on a number of evaluations going on.
This point in time, so a we've seen some proof main clearly on the financial side.
Acted as well in December the customers that we've been mentioning but as what we are expecting us any was mentioning that as we turned to corner from called due to the number of evaluations that.
Our hopping harping on taking place now EEMEA sintering again will.
The environment remains on starting.
Cash.
Click to call out, but certainly did it ended up with automation so there.
How should increase on clearly companies have realized this environment.
Thanks.
With that and he was talking about that can help you need assistance.
Thanks, I wasn't tied robin as well.
Thank you. Our next question has come from the line or Mark Murphy with JP Morgan. Please proceed with your question.
Thank you very much and Thats, all I know I wanted to.
Hey, Congratulations you've had the Midas touch in every single role.
We've seen and just can't wait to see.
How it builds from from here.
I just had a question on the imprint of the pandemic on Workday financial because we've heard so many anecdotes of how modernizing finance is going to be necessary from a survival standpoint.
And I'm curious if that is overcoming the hesitation that we've always seen.
To to change of course system like that amidst a pretty uncertain environment.
Well I guess I'll just leave it at that.
No.
Yes, Mark.
You know kind of would've been commenting with cash right.
What I can say that I think companies. This is anecdotal but are realizing that they need to more than rights and to finance FC stance against simultaneous having challenges.
Mostly synergies you're having challenges to.
Basically major changes required I can tell you call customers that are attending the having people sneaking on their business Domino Sunday for.
Being able to provide finance of numbers right when they're all species, our close so clearly the the understanding and the need for the most Denise let's let me say shoney's there as you would say from our survive our perspective right to be able to accomplishing what these fast.
I would also again repeat myself, saying that said the number of evaluations that we are seeing out there on our partnering assess team has increased with the financial sites again with the caveats Philip is difficult to anticipate healthy overall environment, which is quite uneven I'm still it is when it falls.
We might be expected that these type of use incineration went the other end.
70 to say yet.
Thank you very much.
Yes.
Thank you. Our next question has come from a line of Keith Weiss Sorry, Morgan Stanley. Please proceed with your question.
Excellent. Thank you guys for taking the question and very nice quarter.
A question for a aneel and related to China, Congratulations on the under new role I Neal within China, now, becoming co CEO you Apache in your role changing at all and how do you guys speak about kind of dividing up the responsibilities between the two you.
Are you going to move into something that's like more strategic and in China is going to be working on sort of the day to day operations or like how do you guys proceed at working with the studios Cookie those now.
Well so channel is taking on all customer services.
And a lot of marketing too and that's that's half the company and.
For me I'm I'm more of a product person and strategy person and I personally would like to get back to.
Working with our product teams and our and our venture teams and our strategy teams on.
Where we go with the future and then is super important that we maintain the.
Great culture that we haven't so working with employees is critical to so.
Much like it was with with me and Dave.
Two likeminded people are better than one in the CEO job and it was my best experience at work day, when Dave and I will co CEO, so I'm thrilled to be able to.
Sure the wall, which auto and he is a much stronger operational leader than I am So he is going to.
Take over the things that are that he's really great up and overtime.
We'll figure it out were great friends, and we'll we'll figure out the the right mix over time.
I guess it yeah go ahead pretty good.
I know you go first.
No no I was going out.
China to comment on that too.
I'm very excited about Dan.
The opportunity clearly on everything so lots of set to any update on duration to both I think we're quite complementary.
And we get to their own very well.
Good point of views on kind of each others say areas, but.
But 70 really really excited to the.
Contributing as much as they come more.
On the go to market customer relationship as a whole from the acquisition to customer success the services.
To support.
Driving the company going forward.
Wrapping them under recipe of sceptical meetings.
I think it's a good.
Because one we have right now quite clean costs to be honest, but that allow us potentially to play to the strengths that we both have last half so.
That's great.
That's.
Great and if I could sneak one last one in China, you mentioned, you're encouraged by the strength that you're seeing the new products and you talked about workday extend.
That seems like a pretty exciting solution set in that it can really expand the Tam pretty grantley for workday can you talk just wanted that about some of the initial use cases and kind of workflows that you're seeing people put on Han extend platform.
I'm going to handle but as I went to Peterson from the product because I think is much better placed to answer that one did.
Yeah. Thanks for the question. So first thing I would remind you is that extend is is more than a revenue opportunity for us it's an opportunity for us too.
Find ways to become more efficient and R&D because as we provide these tools to our customers, they're able to extend workday in ways that they need and their unique situations instead of us having to actually go and build product for them. So that's that's great said Weve you know this quarter, we we've seen some great wins some.
Early wins with with extend and pipeline looking great as well.
[music].
We've been.
We're seeing lots of use cases, I think we have about 100 different applications live today.
One of them that just went live this quarter was a company that had built a self assessment capability inside of extend so employs consult assess as they were getting ready to return to work and determine whether they were running so.
Extend as about any type of use case, just extending the surface area of workday.
Okay. Thank you guys.
Thank you. Our next question has come from the line up Heather Bellini with Goldman Sachs. Please proceed with your question.
Great. Thank you so much for taking my question, then again chano congrats on the promotion I'm just I I had a question.
And I don't know Aneel or Robin. This is best for you, but just related to the pace of business throughout the quarter. You guys. Obviously had very good results. You gave you know rightly so conservative guidance for the quarter, but can you talk about kind of how the pace of business evolved over the course of the quarter.
If you could share with us when I just have a quick follow up thank you.
Robin.
Yes, so we actually Heather had really good linear already this quarter. So on our earnings call last time I am China had mentioned that he was starting to see more sales activity in may that we had seen in April and we saw continued execution throughout the quarter strongly the equity which add.
Into our topline beat.
And good close rates really strong close rates and the China anything you would add to that in terms of what you were seeing.
No I see was this solid performance throughout the quarter.
I would be part of course.
You know holistic to quarter closeout us a hole.
It's hard to drill out completely straight line and there I'll say that every month, but better than the RFP, but generally the broadly offset racing is that the army housing see marching April West. We commented on housekeeping proven say right, but I said before the market remains to be down starting in the near term which is.
Yes, well reflected on our out right.
Again to be it seems like we have seen season, if articles that has been obviously.
Right right. Thank you and then Neil just a follow up on your introductory comments.
Do you think that's what we're going through and just the desire to have more modern systems. Do you think this will actually accelerate people's desire to move financial to the cloud I know that that's been a market that you can probably longer than people thought to really really make a wholesale shift is this is this kind of an accelerant.
Oh that trend you Frank based on what you're hearing.
I definitely think it is the need for agility flexibility.
Is so critical in today's world and.
Maybe if you were whether your business last couple of years and the word werent many.
External factors your core accounting system was probably fine.
Well, that's you think the bigger driver for US is the broadening we.
[noise] for five years ago, we would go in with.
Our core accounting message for customer wasn't ready to replace core accounting.
We didnt have any also talked some about today, we can start with planning.
Don't have the conversation about core accounting, but could talk about scout we've talked about prism analytics.
We now have the end suite that.
A number of years the legacy vendors to build.
On premise and now we have it in the cloud and three four years ago. We just did we didn't have that scope for that breadth and today, we do and I think thats a big part of why people are moving then they don't want to just move their quarter accounting system. They want to look at procurement. They want to look at planning that well look at analytics and and then increasingly now for certain sort of industries the work.
The accounting center.
So we had that altogether, we now have.
A basket of products that meets the needs a pretty much everybody and and they they can they can move for.
The comfort that we can cover their full needs not just not just one part of their needs I really do you think the bigger driver.
Great. Thank you.
Thank you. Our next question is something in a line of Alex Zukin RBC capital markets. Please proceed with your question.
Hey, guys. Thanks for taking my question congratulations on the quarter and try to really thrilled for you as well.
So maybe a Neil one of the interesting things and you touched on it I think and answering kirks question, but I wanted to dig a little deeper one of the interesting things. We've picked up recently in our field work is this increasing shift of power back to the HR executive and department to your point as more executives are getting concerned about employee engagement talent management mental health diversity in.
Solution in this new kind of remote world and I guess the question is what are you seeing from this are you seeing this on the field actually starting to impact sales cycles pipelines conversation and does this impact the secular growth trajectory of the HCM business.
As we kind of come out of this crisis or longer term.
In terms of the secular growth I, that's a hard one to predict but I would say that.
Yes.
Well, but I've never I've never had so many CEO conversations on on the HCM product line.
And I think the issue of employee health.
Mental health physical health.
How are they doing working remotely how are they worked on their projects. The this new world of skills and.
You know it different worlds around talent.
Become a number one priority so CEO.
That is definitely elevating the CHF two or more.
Position within the company.
And then.
Maybe just one for for Robin can you talk about that 6 million dollar accelerated.
Payment term and also any just FX impacts on kind of the guidance headwinds or tailwinds.
Yeah sure. So the 6 million was the result of a workday customer who was acquired by a non workday customer and therefore, they wanted to terminate their contracts of the prepaid the remaining balance of the contract which should have gone several more years and that caused an acceleration of the rest of the revenue across the contract. So a onetime event.
On that front and I am sorry, Alex It was the second part of your question.
No just related to FX in terms of the tailwinds or the headwinds with respect to the guide.
Yeah, really no no FX impacts to call out.
Perfect. Thank you guys and congrats again.
We will now take two more questions.
Our next question something a lot of mass found with William Blair. Please proceed with your question.
Hey, congrats on the quarter guys and thanks for taking my question wanted to ask on Workday launch in the expansion of the solution a large enterprises.
Maybe first of all is this a response to perhaps the demand for faster time to value solutions driven by cobot or is this something that was sort of always in the works pretty covet and then what's the scope of this in terms of the type of large enterprises that could potentially use workdays launched to pick it up and running thanks.
Uh huh.
Yes.
Thanks for your question, Matt I mean, it was always kind of on the works once the allowance was more proving in day meeting their price across the board.
Clearly that offering was basically the resulting in good health plans in terms of both by antibody lump.
Yes of course, so the idea was always to expand to beat more up is it fair auction to price by nowhere more on the nowhere and auction to price.
Customers that you could say.
Good day syphilis housing today 70000 employees kind of what we are implementing it is each can be across all verticals. Once you have basically the buckets Asian will stay off before offering and again, we provide both the main deck.
Hi, antibody lump activity.
Caused some nice enough 60 basis.
And does it do anything peer market opportunity in terms of potentially accelerating adoption are reaching customers that you can reach previously.
He Kentucky can definitely help on on those customers that are looking for more.
Proactive on it today I'll frame that will impact faster, we get ROI, we are trying to audio emotional and those customers that are looking for a fixed cost sometimes in terms of the opening of the implementation.
Okay. So definitely.
Right.
Those markets where pike.
Great. Thanks, guys appreciate it.
Thank you. Our next question has come from the line of Scott Berg with Needham and company. Please proceed with your questions.
Hi, This is Ryan Macdonald on for Scott Berg, Thanks for taking your questions and congrats on a great quarter could you provide a little more color on on adaptive sales and the continued traction you see there compared maybe to both strong results you saw in Q1, and then also help pipeline is looking into the back half the year for that.
Tom you want.
Yes, sure thanks to the Craig Thanks for the question Ron So.
We continue to make excellent progress with adaptive and I'd characterize it as a first of all while the straight selling workforce planning into the our work say the broader workday ATM customer base I think thats an area that our team substantial Bob of success.
Environment really.
Increases the importance of the criticality of doing effective workforce planning for many organizations, whether it be location head count planning skill planning training diverse. They I think those are all aspects that are important to our customers, but we've also seen.
You are significant increase in interest in getting modern financial planning systems for organizations side.
I think we talked last time about.
Customer activity running multiple scenarios because kogut.
Perhaps not same levels, but that continues as customers think about their business and rum cop networks that are essential to understand what their businesses are doing going forward.
So we've seen strong customer demand I should Neal said.
Captive and scout both have rapid times to value.
That's a that's important in this environment.
Excellent and then just as a follow up for Robin Robin just wondering if you've seen request for flexible payment or billing terms from customers persist through second quarter, and I guess and early third quarter here at all.
Yes, so we continue to see those requests we got an initial wave when covered fit first hit as you can imagine, but we do continue to see request from customers.
Some new customers, we see some requests upon renewals we continue to evaluate those on a case by case basis and to get relief where it may.
I have to our hardest hit customers and I do expect if that will likely continue through the rest of this year.
Excellent. Thank you.
Ladies and gentlemen, thank you for your participation on today's conference. This will conclude workday second quarter 2021 earnings call. Thank you again for joining.
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