Q2 2022 Workday Inc Earnings Call
[music].
Welcome to workdays second quarter fiscal year 2022 earnings call at this time, all participants are in a listen only.
Mode, We will conduct a question and answer session towards the end of the call I will now hand, it over to Mr. Justin Furby, Vice President of Investor Relations.
Thank you operator, welcome to workdays second quarter fiscal 2022 earnings conference call.
On the call, we have aneel push rate in China Fernandez.
Our co Ceos Robbins, Cisco, our president and CFO and Peter Lamb, our executive Vice President of product development.
Following prepared remarks, we will take questions.
Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast.
Before we get.
Get started we want to emphasize that some of our statements on this call, particularly our guidance are based on the information we have as of today and include forward looking statements regarding our financial results applications customer demand operations and other matters.
These statements are subject to risks.
Uncertainties and assumptions, including those related to the impacts of the ongoing COVID-19 pandemic on our business and global economic conditions.
Please refer to the press release and the risk factors and documents, we filed with the Securities and Exchange Commission, including our 2021 annual report on Form 10-K.
And most recent quarterly report on Form 10-Q for additional information on risks uncertainties and assumptions that may cause actual results to 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.
As 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 with comparable GAAP results in our earnings press release.
Release, and on the Investor Relations page of our website.
The webcast replay of this call will be available for the next 90 days on our company website under the Investor Relations link.
Also the customers page of our website includes a list of selected customers and is updated monthly.
Our third quarter quiet period begins.
On October 16.2021.
Unless otherwise stated all financial comparisons in this call will be to our results for the comparable period of our fiscal 2021.
With that I will hand, the call over to Aneel.
Thank you Justin and good afternoon, everyone. Thank you for joining us today for our second quarter fiscal year.
<unk> 22 earnings call.
I'm pleased to report that Q2 was one of our strongest quarters in company history.
On the Q1. This was the best first half of the year in terms of ACB growth in over three years.
Came into the year expecting your business to accelerate.
The digital acceleration across HR and finance.
And exceeding even our own expectations.
Our leadership position continues to strengthen driven by a broadening of our product portfolio and exceptional execution.
The growing workday customer community now includes 55 million users and 50% of a fortune 500.
Of which approximately 90% are live on workday.
Workday.
Challenges are more shortly on our go to market success and Robin will provide specifics in our res growth outlook for the second half of the year, but let me share for some of the highlights from Q2.
Let's start with workday HCM, our position as an innovator and market leader with our differentiated suite of products that's never been stronger.
We continue to attract new customers and many of our current customers continue to grow their investments with us.
In Q2, we welcome Cvs Health, Iberdrola, Vallejo management services, California, Pizza kitchen, and Heidelberg cement a G to the workday family along with many other new HCM customers.
While these new wins are very important to us we remain equally focused on delivering excellent service to our current customers and that includes delivering on our commitments among.
Amongst the many go lives of Q2, I would like to highlight Harman International industries Bj's wholesale club in old Dominion.
In addition to the strong growth.
From Cory it's Jim.
First full quarter with Pecan I'm pleased to report, we got off to a great start delivering the largest quarter in <unk> history with the early success selling back into our installed base.
True Testament to the incredible pecan products and even better pecan team.
We also continue to see strong traction for our financial.
Management suite of applications, we believe that a combination of our expanded set of offerings, including planning spend management and accounting center and the acceleration of digital transformations by the office of the CFO.
Are collectively driving broader adoption of our finance offerings. In fact highlighted Q2 was nearly 50% ACB growth.
And they're working on adaptive planning business showcasing our strategy meeting customers, where they are continues to drive significant success.
In addition, we continue to see momentum build in our core financials deployments Nucor.
New core financial customers in Q2 included Cinemark, USA University of Wisconsin system and wise markets.
Notable core fins go lives, including the University of Southern California, Keybanc, North America, and Fox Corporation.
Moving on to the innovation front, we are focused on broadening our platform and extending our product capabilities to create additional levers for long term growth. As recent example, and to continue seizing on the great opportunity we have internationally.
This quarter, we announced our intent to deliver workday payroll for Australia, and Germany. As you know our country specific payrolls are very compelling to customers and we're excited to deliver these new solutions as levers of growth for these markets.
We also recently announced that Workday has achieved ready status for the federal risk and authorization management program.
Graham or fed ramp at a moderate impact level with full authority to operate estimated for spring 2022.
But this achievement, we materially advanced our position to help federal agencies.
Our digital transformation in order to help them modernize their business systems and gain real time insights to address critical challenges across the organizations.
Switching to the people front, we continue to invest heavily in our company culture to sustain our belief that happy employees deliver the highest levels of satisfaction to our great customers on that note starting in Q4 of this year, we'll be extending our cash bonus plan companywide to further ensure our people feel valued motivated and properly recognized robin will.
Update you later on our margin expectations for the back half of the year. This is a direct reflection of our business momentum and the confidence we have in our work means to grow the business at $10 billion in revenues and beyond.
With our outstanding first half of fiscal year 'twenty, two we're seeing acceleration in our business as I look ahead, my optimism for <unk> future.
It couldnt be higher we have a great team in place and a significant global opportunity in front of US as companies continue to embark on their HR and finance transformation journeys with that I'll turn it over to our co CEO, China Fernandez overview channel.
Thank you Aneel and thank you to everyone for joining us today as Aneel mentioned.
That's the Q2, driven by very strong execution, which combined with a rapidly improving demand environment or enterprise management cloud solutions.
Discussing our menu business to accelerate.
Even faster pace than we expected.
The strength in Q2 was.
We help base highlighted by large enterprise outperformance and solid growth in London, New core HR fins customers.
We also saw strength in landing new customers across our expanded portfolio of solutions targeting the office of the CFO and Charles.
For example.
Our planning on work the extra <unk> sourcing distances drove significantly strengthening winning new large enterprise customers in Q2, including the largest planning the first deal in our history.
Pecan drove significant new logo activity in EMEA, providing as a gateway into setting core HCM.
Seeing fins solutions overtime.
In addition to solid performance from our launch Telus theme the momentum we've been seeing with our customer base being also continued in Q2 as companies look to workday as a trusted strategic partner.
We had another quarter of strong.
Longer and what performance on our customer base being drove strength cross selling a number of solutions such as core fins planning spend management help become extinct and our planning portfolio.
For example in planning, we signed <unk> deals with Google with one.
Worlds largest telecommunications company and a fortune 100 distribution company.
And in our spend management, we had a number of items when companies such as Walmart secures Mercy Health CME group on Ralph Lauren.
We also had a number of notable extended customer space.
These wins in the quarter, including a fortune 100 manufacturer are Fortunately the energy company on one of the worlds largest box.
Hum isn't just landing new logos is a powerful solution to sell back to our customers. We had notable other deals this quarter, including update.
Perkin Elmer.
From a geographic standpoint, our performance was strong globally with North America outperforming across all segments, including significantly strength from our large and medium enterprise themes from industries, such as healthcare <unk>.
<unk> patients.
International markets EMEA was a standout driving healthy acceleration in new ACB bookings with particular outperformance in continental Europe, including outstanding performance in France and Spain.
We are seeing improving market dynamics and pipeline momentum.
Across our rest of world regions, and we expect those trends to continue as we move into the back half of the year.
As we've discussed over the last few quarters, we're investing aggressively in our go to market.
Our largest area of head count investment in the first half of FY 'twenty.
Within sales and marketing as we added significant new robot sales capacity across both our net new on the installed base team.
Including a doubling down in international markets.
We're also accelerating our expand across key brands, our marketing initiatives.
<unk>.
<unk> investments, which we expect we continue in the second half of the year, our focus on driving growth in FY 'twenty, three and beyond and we're very pleased with the evolution, we're seeing in our pipeline, which again saw solid growth in Q2.
In closing I would like to.
To think that more than 13000 Global walk me will have enabled us to drive such a strong Q2 and first half results.
Our broad and differentiated suite of solutions is winning in the market and we're incredibly well positioned as we entered the second half of the year.
Let's keep the momentum going.
Volume and now I will turn it over to our president and CFO Robin Cisco over to you Robin.
Thanks, Chad and good afternoon, everyone.
As Aneel Antonio mentioned, we delivered an incredibly strong Q2, driven by exceptional execution against a rapidly improving market backdrop as organizations.
<unk> accelerated the pace of digital transformation across HR and finance.
Subscription revenue in the second quarter was $1.1 billion up 20% year over year, driven by very strong new business sales favorable in quarter linearity and an over performance on customer renewals.
So retention once again over 95%.
Professional services revenue was $147 million, resulting in total revenue of 1.26 billion.
Revenue outside the U S was $318 million up 24% year over year and representing 25%.
With gorilla.
24 month backlog at the end of the second quarter was $6 eight 8 billion growth of 19%.
Total subscription revenue backlog was $10.5.8 billion up 23%.
Our non-GAAP operating income for the second quarter was 200.
Of the top 2 million, resulting in a non-GAAP operating margin of 23%.
Margin over achievement was driven by a combination of top line outperformance and favorable expense variances.
Operating cash flow in Q2 was 198 million growth of 26%.
Nine in addition to strong profitability from our core operations. During Q2, we also recognized a nearly $100 million mark to market gain from the successful IPO of one of our ventures portfolio companies.
We will continue to see mark to market adjustments from our equity investments and we expect gains of this magnitude.
It will be extremely rare.
Our largest investments continue to be in our people and in attracting top talent to workday.
In the first half of the year, we successfully added and integrated more than 900, net new employees, bringing our total employee count to over 13400 at the end of Q.
We've made important progress towards our full year target of adding 2500 employees and expect the pace of hiring to increase throughout the back half of FY 'twenty two.
Overall, we're extremely pleased with the momentum we saw in Q2, and we're very well positioned as we enter the important back.
Half of the year.
Now turning to guidance.
Based on our strong Q2, and the momentum we're seeing in our business, we are raising our FY 'twenty two outlook and providing Q3 guidance as follows.
For subscription revenue, we're raising our full year estimate to be in the range of $4 five.
Five 1 billion to $4 five 1 billion, 19% growth.
For Q3, we expect subscription revenue of 1.156 billion to 1.158 billion, 20% growth at the high end and we expect 24 months' backlog growth of 19%.
We still expect professional services revenue to be $590 million in FY 'twenty two as we continue to prioritize driving the highest levels of customer success.
For Q3, we expect professional services revenue of $150 million.
Investing for growth remains our number one priority.
In addition to the increased pace of hiring in the back half of FY 'twenty. Two we also expect to ramp non head count spending with investments specifically targeted at accelerating demand generation enhancing our market position and advancing our strategic product roadmap.
Additionally, the new bonus plan Aneel mentioned.
<unk> will take effect on November one and is expected to impact our Q4 margins by approximately 300 basis points.
Given that backdrop, we expect non-GAAP operating margins of 21% in Q3 <unk>.
16% in Q4, and 21% for the full year.
The GAAP operating margin is expected to be lower than the non-GAAP margin by approximately 24 percentage points in Q3, and 25 percentage points in Q4 and for the full year.
Given our strong performance, we're also raising our FY 'twenty to operating cash flow guidance to $1.5 billion.
We continue to expect $270 million of other capital investments to support our customer growth and continued business expansion.
I'll close by thanking our amazing employees customers and partners for their continued support and hard work.
We're off to a very strong start in the first half of the year.
And our focus remains on driving accelerated bookings growth.
We look forward to hosting our virtual analyst day on September 21st where we will share insights on our strategic innovation and growth initiatives. As we look ahead to FY 'twenty three and beyond.
With that I'll turn it over to the operator to begin Q&A.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up your.
Your handset before pressing the star keys, one moment, please while we poll for questions.
Your first question comes from the line of Kirk My turn with Evercore ISI. Please proceed with your question.
Sure Thanks, very much and congrats on.
Good quarter, great to see the acceleration in a C D growth.
And Sean I was wondering can you just talk a little bit more about what you've seen over the last six months I know you were both more upbeat about the pipeline heading into this year, but when you talk about a quarter of this magnitude from a growth perspective can you talk about maybe what happened in the GOR that you weren't expecting whether it was deals.
And are really coming in at a faster cadence deal cycles, you know getting shorter deals growing perhaps at the end of the deal meaning more add ons more multi product deals I was wondering if you just add a little bit more color of that and kind of why do you see that continuing into the back half of the year, what gives you confidence around the pipeline. Thanks.
So I'll just make a couple of comments.
It's about what I hear from other Ceos, and then I'll turn it over to Toronto.
No.
For the most part Ceos are pretty optimistic about about the future of their business and they also realize that they have to jump on board of the of digital transformation.
Formation for both HR and finance.
So despite what's been going on with the pandemic the mindset.
So it is back to business and so we saw that in the pipeline and we saw it in <unk>.
People taken actions, they're not sitting on the sidelines anymore, and maybe John can add to that.
Hi, Kirk hope, you're well I think to unpack a little bit the strength in Q2 was was truly broad based highly.
Highlighted by solid growth.
In London, New corner chart, I'm seeing customers, we have significantly strengths across the business as we mentioned, but I would call I would call out the large enterprise team that's like Ehealth performer.
There was also a strong performance across regions, particularly we saw healthy bumps blocking EMEA and continue.
Into Europe.
We also so good dynamics in terms of lending and new products within the office of the CFO.
<unk> seen some fee and supplies were good contributors as well.
And last but not least there was solid for four months in our installed base things and renew was.
So as a whole it was.
Quite across the board the very positive I would just highlight we don't need to say it like these acceleration of the transformation. When you see these coming back to the table and really is coming back across our financials sung HCM that at least is what we're seeing.
What it is reflected as well in the pipeline when we look.
The second half.
If I could just have one fault for Robin Robin you know, obviously, a really impressive quarter across the board. When we look at the C. R. P. O growth a 24 month backlog I assume that's still has some of that headwind from the expiry base on it so you're ever going to apples to apples.
It's probably been above 20% on this quarter, if we try to normalize for that is that fair and I assume that expiry base headwind should dissipate a little bit as we get into fiscal 'twenty. Three thanks, Yeah. Kirk we discussed last quarter still holds which is that we're seeing an impact of roughly a couple of points to the 24 month backlog throughout.
FY 'twenty, two and you're correct that we don't expect that dynamic in FY 'twenty three at all and just as a reminder, this dynamic has no impact on new ACD bookings subscription revenue or how we run the business and our focus continues to be on accelerating our new ACD bookings were really pleased with our progress on that front and you're seeing that show up in the backlog.
Growth numbers, even despite the headwinds that we have this year on renewals.
Thank you all.
Your next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.
Oh, great. Thanks, so much for taking my question and congratulations on a real nice Q2.
Two.
Wanted to ask a question kind of goes back to comments, you've made last quarter aneel around really the strategy with fins is to surround the account surround the transactional system with some of these peripheral systems, you're seeing real strength in planning it sounds like procurement is really ramping at what point is there a.
A potential migration that happens when when you have is it one or two of these modules. They are running it for a year or more is there a certain tipping point when you might expect some of those conversions on the core transactional system overtime. Thank you well it does definitely it doesn't hurt to have a combination of HCM.
Maybe a few financial modules in there, but I think the more important dynamic is that.
As a as we as we.
Exit running the businesses for the pandemic and tried to run business in a more normalized way the demand for our core financial systems is coming back.
And we saw that we saw that this.
This quarter it was a strong quarter for core financial systems. We saw we saw the entry point with planning being up over 50% as a really strong indicator of what we might see over the next few quarters.
So it's really it's more than just one dynamic it's it's across the board and so we saw strength in the add on modules. We also did see strength in core accounting as well.
I'd like to highlight accounting center is a really important product for.
For some of the large volume.
Our customers we have out there in particular in areas like financial services.
That continues to get great traction and great reviews, just opening up more doors for us for core accounting.
That's great to hear and one more if I.
Please and you know in the past you know about a year ago, you talked about some pandemic headwinds. Since then you've obviously seen those improve what are you hearing from the office of the HR manager and the opposite the CFO in terms of willingness to make investments now in digital transformation now that we're kind of exiting things clearly your results.
They're showing that that those projects are coming back in the back office.
I think the mindset for companies that hadn't gone through the transformation was that it was really hard to run their business with a remote workforce or a hybrid work force or whatever model. They had to go to without the flexibility.
And and and.
And ability to work from home with that cloud systems like Workday offer if you're on legacy systems. It was a really hard time and so I think folks have said hey, even if we are still dealing with some of the issues around the pandemic, we gotta get on we got to get on with it we've got to move on to the modern systems and that's that's been a real big driver for us.
Great to hear thanks, so much aneel.
Your next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.
Excellent. Thank you guys for taking the question very nice quarter.
Couple of questions kind of or.
Multipart question digging into kind of the nature of the strength that you guys have been seen in this first half of the year and it's really in two parts one in terms of.
Is what you're seeing is kind of a release of pent up demand like last year was it calendar 'twenty was very good all year to get the big enterprise transaction.
Actions across the line, so I'm, assuming a lot of it.
It's kind of in the.
Our pipeline or is there more of a combination of sort of pent up demand and new business coming into the pipe or sort of a new digital transformation initiatives getting an extra kind of boost given what happened last year and then similarly.
Last year, one of the real quite spots was how well the upsell motion needs of the base motion are propped up overall growth for the company has that sustain it.
With sort of new business ramping up have you been able to keep that good balance of new business in the door as well as upsells.
Cells and into FY 'twenty two thank you I'll take the first part.
It is a bit of both Theres no question. There was some pent up demand that's impacted the first half of the year, but I really think depending like.
Forced a sea change.
A change in mindset.
About how quickly people had to get into the into the cloud and move into the digital transformation projects for HR and finance so while it might have slowed down last year I think it's picked up and now we think it's gonna be that way going forward and.
Even companies added waited for a long time are now acting today, so a bit of pent up demand.
But I think more.
Positive change in the marketplace going forward Tony.
Tony you want to add to that.
I would just say that you know jointly with healthy new logo activity to your question Keith weed seeing a very solid quarter with significant growth rates and why when installed base.
It is not just one single solution.
Solution right.
When you look at Cros accounting center or help or its thing people. I mean can you know people don't I need the extended all contributing so the upselling and cross selling we think a satisfied customer base remains very healthy so he's.
Really the business, having good momentum.
All engines.
Excellent outstanding it guys. Thank you.
Okay.
Your next question comes from the line of Mark Murphy with J P. Morgan. Please proceed with your question.
Yeah, Thank you and I'll add my congrats so robyn.
Our thinking was that the pipeline inflection that you saw a couple of quarters back would not convert to bookings really until later this year and into next year and so just given the upside did you see it.
A bit faster cycle of of pipeline conversion than normal.
Or did you kind of still see it lining up a relatively more toward year end.
Yeah, well as you know, we always have a really important and strong back half of the year and that's not changing this year. We did have very very good pipeline conversion rates in Q2, and maybe tunnel I'll, let you comment on on that being on.
On the frontline there.
Hi, Mark clearly signaled the land emotions convert faster right. The quirkiest studying sourcing or some of the planning or peak on Standalone motions those will be converted to foster them done decor H T hang on core financials products, but.
Obviously did the strains coming already from the pipeline that it was built during the second half of last year has already started to play out and will play out more during the second half at D. C. Here.
Okay understood. Thank you then just a quick follow up for you I was wondering about the cadence of finance.
Teams are there you know we know that they paused their spending during the pandemic and now they've been wanting to accelerate their move to the cloud do you think that is the part of this you know kind of remain inconsistent where they might pull in some of the projects. They had planned in 2024.2020.
25.
I'm I'm I'm sort of wondering with with the delta varying headlines in the news is is that going to intensify that or defer that a bit more of a more of a zero issue from the delta variant.
Time will tell right when we thought we were coming out of the pandemic we get.
Delta variant so it's it's just such a.
Changing unpredictable world right now the last data that I saw from Gartner suggested that projects. This from this year and for summer next year would be pushed out a project from 24 would be pulled into 'twenty, three and so and I think our pipeline suggests that the pipelines.
With that or for financials.
And it should continue to get better and I think going into next year more projects will get pulled into next year.
Understood. Thank you.
Your next question comes from the line of D. J Hynes with Canaccord. Please proceed with your.
Getting better.
Hey, Thanks, guys and congrats on the nice start here to the second.
First half of the year I wanted to ask about the hiring environment and progress on that front two questions, maybe one for Rob and one for China. So Robin you're at 900 net new employees of I think you said 2500 targeted.
How does.
Is this seasonality right, 35% in the first half 65% in the second half compare to kind of internal plans as well as <unk>.
Higher years and then.
Just given the head count ramp expected in the second half.
If I gave you 10, new sales reps, how would you allocate them between hunters versus back the base reps and maybe you could.
Talk about maybe how that might be different than it would have been in a year or two ago.
So on over her overall hiring D. J. So as you know we came into the year with really really aggressive hiring plans.
I would've hoped we would have been a little further along than 900 at this point, but it took us some time to really ramp the recruiting engine.
Because as you know we had paused hiring a lot of last year. So we had to get that going and so it's not surprising that we are going to be backend loaded we feel really good about our recruiting engine right now we feel good that we're gonna be able to accelerate hiring into the back half of the year and we're still targeting that was 2500 hires.
So we feel good about where we are but maybe a little bit of a slower start than what we had hoped coming into the year.
Okay.
D J as things got robbing is more generally done you are not giving me some more head count that team.
If I wouldnt be to play out with the 10 I would say that the first thing kind of ankle and I will be looking at geographic.
Graphically and clearly we are allocating more sales capacity today in international markets, where we see a significant opportunity ahead. This is not just for you know second half this year, but clearly as FY 'twenty three and beyond as well so that would be first I mentioned.
The second one would be clearly you know, yes between a balance between.
<unk> net new logo on the installed base, but also you need to consider that we have some of the launch first motions across a P, calling or planning or strategic sourcing. So those placed into account as well and we see opportunity clearly across our Cros and then you'll all activity across your store base and some of the land motion. So.
Oh, you know balanced picture across those are clearly with a more PV investment within our international markets down within North America today.
Yeah, Okay perfect. That's helpful color. Thank you guys.
Yeah.
Your next question comes from line of Brad Reback with Stifel.
Before these proceed with your question.
Oh, great. Thanks very much.
Think about the $1.1 billion of 24 month backlog increase year over year.
Are we at a point now where half of that from new customers versus growth that existing any sort of color on that would be super helpful.
Yeah, Brad So as you can imagine the bigger we get and the longer we've been in business. It will shift that backlog component more towards renewables and then that news. So that shift has been something that has been in process for quite some time. This.
This year it is different as we pointed out earlier that we actually have flat renewals.
<unk> year over year, and so we're getting a little bit more of a proportion them towards net new this year, but we expect that that trend will.
Will reverse again next year as we get back to more normalized renewables growth.
Great. Thanks very much.
Yeah.
Your next.
Question comes from the line of Michael.
Terrorists with Keybanc. Please proceed with your question.
That's great congrats on the quarter very nice so robyn.
Robin.
It's a nice margin beat and raise on the year. It seems like it's more than just revenue upside and this is.
Despite.
What it has been very aggressive hiring lots of discussions of investment. So so so is this a change at all in your operating philosophy or structure, such that you're able to get this margin upside and we're accelerating revenue too.
Well you know a good part of our margin raise was.
Over performance on the top line. So that's a very big chunk of it we had some expenses you know slipped from Q2 into the back half of the year some of our programmatic spend and as I. Just mentioned before we were hoping to do a little faster hiring. So we have some savings from that as well as we look at next year, though.
You know keep in mind that a lot of the hiring we're doing this year is going to have a full year impact next year. Some of the programs were going to put in place in the back half of this year will roll into next year. We also expect that certain costs will layer back in such as travel returned to office and hopefully in person events that we can.
Can start doing again. Additionally, the bonus program that Aneel talked about with about a 300 basis point impact on margin that will continue into next year and beyond and so it's a performance based plans. So could vary with our results, but we expect that impact to remain fairly consistent through next year, if we achieve our targets.
Keep in mind, though that the impact from the planning on margins will vary over time based on top line growth hiring and performance against our goals. So just keep all of those things in mind, when you think about longer term margins.
That's really helpful. Thanks, and then it sounds like.
Well can you give us some sense of it.
Where ACB.
She is coming in relative to HCM Asia.
So we saw growth in both fins and N H C M. A C D and both contributed to our over achievement in.
In this year, both contributed to our guidance raise and we're seeing really strong.
Growth across both of those in our pipeline as well.
Total I'm not trying to pull that out of I'm, just saying in terms of individual deals coming in larger levels than HCM.
For individual customers.
In terms of pricing.
We are still.
And the world of HCM.
We felt absolutely the biggest companies in the world like like a Cvs health.
And in finance.
The bigger companies haven't yet moved to the cloud with are beginning to.
So right now I'd say the average HCM customer at the high end is bigger than the finance customer, but that's that's changing and they will equalize overtime. Okay.
Your next question comes from line of Alex Zukin with Wolfe Research. Please proceed with your question.
Thanks, guys for taking the question so I guess one element.
That seems interesting is there's a lot more of these new land motions around I think you mentioned planning you mentioned P cards.
John spend management I wanted to get a better understanding how much of the bookings is this kind of is now coming from this new land emotion because it does feel like the opportunity for dollar based net expansion or expansion and going back into those customers, there's going to be higher and so you kind of are opening up this new it's.
It's a little bit different than.
Normally when you have such a large land that the upsell was more difficult.
Yeah, that's yeah.
Yeah, clearly clearly on it they the majority of the dollars out of course is to come in Florida from the core HCM under core fins and transformation as a whole. These land motions are currently approved.
You know what they are providing is much more significant volume upselling, particularly on the installed base, but as well getting us into new customers that we're expecting to cross sell later on went on where paccar products, but of course, the majority of the ACB. He's obviously a stem from the big bigger transformation projects.
Understood.
And Robin maybe kind of Dovetailing on on Michael's question is it possible to get a little bit more color on some of the you know the tailwind on margins this year and how to think about them layering out of the model for next year, particularly as we get back to some of those pre.
<unk> go to market motions and travel and.
And with the bonus pool.
Yes, and in addition to you know.
My commentary answering Michael's question I guess, the only thing I would add is that we still have six months to go until we're in the next year things like travel and how much it comes back or still.
Uncertain and so it's a little hard to predict right now above and beyond the drivers that I mentioned earlier, but we will share more with you on FY 'twenty three margins are at a later date, when we get closer and we've close in another quarter or two.
I would add that I do think our travel and entertainment.
And budgets.
I think those are those will change going forward, even when we get out of the pandemic. We we've just learned how to work smarter without having to have people on site everywhere. You can do a lot of work from from your office or from at home and then you can concentrate the few trips on really meaningful activity. So.
And I don't think that's specific to work.
I think that's specific to.
A lot of companies that were just used to.
Spending a lot of money on travel that that probably will not spend like that again.
Perfect.
We will now take two more questions. Your next question.
Comes from the line of Raimo lunch Chau with Barclays. Please proceed with your question.
Hey, Thank you. Thanks for squeezing me in and congrats from me as well.
Channel can you talk a little bit about the importance of the new rules that you announced.
Germany, and Australia, just in terms of the D.
International build out the crude as you know we all agreed to speak opportunity. The question is like you know in terms of financial functionality.
Hey, all functionality you quite yet to kind of capitalize on that and then I had one follow up.
Yeah, Raimo, we you know, we we really understand how good knowledge how important.
He called payrolls are to our strategy and our customers I mean, if you look at.
For your money and you know the country well, our workforce management over there and the number of manufacturing companies when we're providing them a solution surrounding each seeing having pay only sort of tremendous importance for us to capture a bigger part of the market.
Like we say this thing out of Australia. So D. C is expansion really into these markets is very significant and critical towards strategic.
And he said is that we do have for growth, we think our international markets. So we feel very good about it obviously is going to take us.
You know a couple of years to develop a dose but even.
He customers knowing that that yourself with a strategy. We think that is going to open more doors for consideration on some customers that are looking more for a provider of dung always we can close the loop as well in terms of the debate on the work force management on time tracking on scheduling as a whole right. When it comes to finance, yes, we just.
Do they have been doing a improvements in terms of where international capabilities. I think if you look at some of the analysts there highlighting those sign up the customers as well, they're highlighting those two and we just keep becoming a stronger in terms of all where financials SaaS solution from an international perspective in terms.
So the local regulations and basically they look conversations that are require so that in some cases right now he's highlighted today more strength than any other themes. When some of our customers are are becoming why are they customers. I'm honestly is also a great point that mania going successfully life.
In EMEA with our financials.
Dilutions and those are working very nicely I'm, becoming reference customers for us.
Perfect. Okay, perfect. That's very clear. Thank you and then one follow up like when we talk with the system integrators. They see they are seeing a lot more activity of people sketching out.
Mapping all processes et cetera, which is kind of a first.
So kind of what's like changing the finance system and what are you seeing there in terms of how quickly those kind of projects are evolving in terms of like and also kind of showing up but you guys are we still in the same pre pandemic cadence of like six to nine months.
Lead time.
Well kind of trying to sketch out what you wanted to do and how you want to do it and then doing it or do you see an acceleration here because people realize theres a little bit more urgency here. Thank you and congrats from me as well.
Yeah. It's a great question, what we're seeing is I think more projects taking place Daddy. Soviet says you were saying some customers that are doing what they call kind of a place zero, which is these might be.
The processes and understanding what it would be the you know the David near the the future compared to with the US east kind of processes that they do have today and they're working that with assisting integrate doors, but I think does a are being worked faster because there is more urgency there for transformation being all the pains that.
And difficulties that some customers have been facing during the pandemic phase I'm be clearly and you know there are many more projects taking place as well around the financials transformation, we should gradually improve things what we're seeing there as more customers are moving to financials to the cloud.
Perfect. Thank you.
Your final question comes from the line of Scott Berg with Needham and company. Please proceed with your question.
Hi, everyone.
In the quarter and thanks for taking my question. So first off you just announced the company.
<unk> ready status for the fed ramp program, how should we think about the cells.
Opportunity in that segment and what products do you expect those customers will adopt them us.
Oh, well, it's it's a if it's already in motion we already have.
Customers in the federal government, they're more quasi federal agencies and full favorite agencies that are using workday.
And as we go through the.
Tycho you know, it's a long sales cycle, but those sales cycles, who will begin and we're fully on the schedule middle of next year. So I would start out with.
I think you'll start seeing the pipeline build in and hopefully some good good wins beginning to happen.
The agencies first and then full agencies sometime next year.
So you know we're in in terms of HR and financials, there where were a good fit we're gonna find where we're gonna find requirements that we're gonna have to build specifically for federal government, but but we are in general a good fit for both for both solutions for the federal government.
Right. Thank.
And then just one more quick one on you mentioned that a little bit earlier, but I'm kind of talking about Australia, and Germany and the expansion there.
With payroll.
Can you give us a little bit of color on you know how much further should we expect.
The company to take its payroll functionality.
City kind of after those two markets are complete.
You know I I didn't I'd expect that we're going to continue to invest in payroll integration across the globe.
We might add one or two more payrolls over the next few years, but you're not going to see us add 10.
You know on unless we unless we find a great.
Thank you need to acquire which we havent, which we haven't seen yet.
Well, we are doing is going country by country, and where we don't have a payroll really trying to build a tighter tighter integration.
But honestly, what most of our customers do with.
With their global payroll demands anyways.
Awesome. Thank you.
Ladies and gentlemen, thank you for your participation on today's conference. This will conclude workdays second quarter fiscal year 'twenty two earnings call. Thank you again for joining us.
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