Q4 2022 Workday Inc Earnings Call
Welcome to workdays fourth 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.
During the Q&A please limit your questions to one.
With that I will now hand, it over to Justin Furby, Vice President of Investor Relations.
Thank you operator, welcome to workdays fourth quarter fiscal 2022 earnings conference call.
On the call, we have Aneel butchery and channel Fernandez, our co Ceos, Barbara Larson, our CFO and Peter Lamb, our Chief strategy Officer.
Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website.
This call is being simultaneously webcast.
Before we 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 2022 annual report on Form 10-K 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 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 first quarter of fiscal 'twenty 'twenty three quiet period begins on April 16th 2022.
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 fourth quarter fiscal year 'twenty two earnings call.
Before we begin I want to spend a moment acknowledging the current situation in the Ukraine.
Our thoughts are with all of those who are personally impacted by the devastating situation.
Workday contractors in Ukraine, workmates across the water region in Europe .
Families of military personnel, who have been deployed in the region.
Turning now to our business results I'm pleased to report that workday delivered an exceptional fourth quarter, which helped us achieve the fastest growth for your new ACD bookings in over five years.
This acceleration in our business along with our relentless focus on employees customers and innovation is serving as a strong foundation for driving durable growth on our path to $10 billion of revenues and beyond.
Yeah.
Our business success is enabling us to attract talent at a pace we've never seen before.
And it's allowing us to continue to expand and support new customers across our broad suite of solutions.
And with the CH Arrow and CFO .
Indeed, we now serve more than 60 million total users across 9500 organizations.
But even with a 4100 core HCM and finance customers.
As our customer community continues to expand.
So those are opportunities to serve more strategic ways.
China will soon share we closed several significant transactions within our customer base sales team in Q4.
Our continued commitment to our customer success is also reflected in our industry, leading gross retention rate of over 95%.
Additionally, we are seeing customers increase their engagement and usage of our applications.
Evidence probably over 440 billion transactions processed within workday in fiscal year 'twenty two.
Which is an increase of 67% over the previous year.
Altogether, we now work with over 50% of the Fortune 500, and over 25% of the global 2000.
Yeah.
Before I turn it over to China, who will share more on our go to market success and Barbara Larson, our new CFO will provide specifics on our res growth outlook for fiscal year 'twenty three.
To share some fourth quarter highlights.
First momentum for human capital management suite remains strong.
Musicians continued transition their HR operations to the cloud.
In Q4, we saw healthy demand across all HCM product areas grew by.
Our ability to attract new customers, while strengthening and deepening our relationships with existing ones.
New customers in Q4 include Allied financial Dick's Sporting goods National Australia Bank Limited Rite Aid Corporation, Smithfield Foods, and 711 to name a few.
Notable HCM go lives in Q4 included <unk> industries, Anheuser Busch, Inbev and Wells Fargo Bank.
As we continue to have over 70% of our HCM customers in production.
Yeah.
Switching over to our financial management applications Q4 was another solid quarter, several marquee wins, including Genpact limited.
Mass General Brigham University of Melbourne, and U S Bank.
During the quarter, we doubled the number of add on core financial management wins, when compared to the same period, a year ago and had several customers go live including bright horizons children's centers sharp healthcare and S. S. N C technologies.
In addition to the strong growth from our core financial application. We saw continued momentum from our expanding suite of products that support the opposite the CFO couldn't planning analytics and spend management, where our strategic sourcing solution experience roughly 50% new ACB growth.
And our procure to pay solution grew even faster we continue to see very healthy attach rates for spend management solutions within our financial customers illustrating how financers increasingly partnering with their procurement peers to drive visibility and bottomline impact with a single solution.
Yeah.
As we head into fiscal year 'twenty three we're comping the opportunity we have in front of us and our ability to execute on our growth initiatives on our path to 10 billion in revenues.
As such we expect fiscal year 'twenty three to be another strong year for us.
Lastly, I'd like to share a couple of updates related to workdays board of directors.
First Tom Bogan, who most recently served as vice chairman of corporate development.
Tired from work day on January 31.
While we're excited for Tom in his well deserved retirement, we're thrilled to announce that he has joined our board.
Tom came to work day in 2018 as part of the adaptive insights acquisition a company led as CEO for nearly four years.
During his time at Workday, Tom has been a trusted advisor extreme culture champions and passionate leader, who embodies workdays values. We're fortunate that he will know whether his expertise and guidance to help us capitalize on new opportunities for the business and work to accelerate future growth.
The second update I want to share is that Dave Duffield, My mentor, best friend and workplace co founder and former CEO and chairman.
Stepped down from our board of directors.
Now carry the honorary title, a CEO emeritus well, Dave will no longer be on the board. He remains our largest shareholder and well continue to provide us invaluable counsel as an advisor of workday.
Well, David and I started worked at nearly 17 years ago.
It was to build a lapsing multi generational company with employees at the center.
This focus on customer service and innovation.
We wanted to have fun along the way.
The growth we've experienced this past year in the face of a challenging macro environment is always solidified my belief in the foundation that we've built.
An amazing group of employees and leaders, who embrace our values and are committed to delivering the industry's best products and customer experience I will end by saying that I'm quite optimistic about our future.
With that I'll turn it over to our co CEO charter Fernandez.
To your child.
Thank you O'neil and thank you to everyone for joining today I want to start off by acknowledging the more than 15200 workmates across the globe, who helped drive up we're incredibly a strong finish to the ER amazing Yelp.
I can't wait to see what we accomplished together in FY 'twenty three.
I'm also looking forward to safely is spending time with many of you. This week about where sales kick off here and you got to pay you guys.
Well, we're taking great care to follow the safety measures in accordance with the CDC and local health authority guidelines.
As Aneel mentioned, we delivered an exceptional Q4 growth reacceleration.
By a strong execution and healthy demand across solutions and our regions.
Our performance in North America would stand out.
We had another solid quarter internationally, where Asia Pacific markets, such as Australia, and New Zealand were highlights.
They seem to healthy growth in key markets such as Germany.
We had a solid quarter of London, new core HCM and fins customers.
Including several fortune 500, and global 2000 companies.
With healthy activity in the medium enterprise.
Our expanding portfolio of London, So Lucy on social experience significant momentum.
Including become marketing strategies sourcing and planning, what new customers, including Sony Health care plan.
The call Neil I'm at home stores.
And we couldn't be more excited than they do all our portfolio of strategic lending solutions.
Even though it's early we're already seeing the results with Q4 wins, including RSA in Northern Idaho U K gilt mortgage among others.
In addition to strength from our new teams our customer base sales teams drove outstanding for four months across both adult and renewal was once again, they're more strengthen the strategic nature of our platform.
Customer base expansions in Q4, including U S Bank, who purchased car fins accounting center briefing I extend.
S I ask who purchased workforce planning extend on Canadian UK payroll.
America, BP International and advocate Aurora health or added extend.
In Q4, we also expanded our relationship with Accenture, who is deploying people to gain a real time pulse on its employee base to help power its global planning extracting.
I was just with these partners of ours accent jewelry supplying attenuation in this area to drive engagement and deep employee related insights for our mutual customers.
From an industry lens, we continued to see it with differentiated value proposition of winning in the market.
In financial services for example, we closed several strategic deals in Q4.
Including core fins win at the aforementioned U S Bank junior in which well I'm paying mutual life insurance.
Core HCM win at National Australia Bank, I, like Finance Hill, and Auto Club group.
In addition, we expanded our footprint with several financial services customers this quarter, including Commonwealth Bank of Australia Camp there are western Union.
Industry specific investments such as accounting sent there along with our deep industry knowledge and our rapidly expanding reference base of customers, which now includes more than 70 per saying or the financial services companies in the Fortune 500 are all key towards success.
I mean, it's not just the innovation we are driving that is enabling our success.
But also that of our partners such as Pwc, who created a solution for multi dimensional bunker planning and profitability like leveraging workday financials extend accounting center prism adaptive planning.
Our borrowers are key to our industry approach and were excited by the innovation happening across our ecosystem.
We enter FY 'twenty, three with healthy pipelines and clear momentum in our business.
In order to capitalize on that momentum we plan to continue making significant investments within our go to market and service and support teams.
With keep focus areas, including customer base international industry and American land motions.
All of which are important growth, we're endorsing achieving our goal of sustaining 20% plus subscription growth well into the future.
Part of this investment in both a strengthening our leadership team as we continue to scale.
Which I'm pleased to welcome Patrick Blair I thought were newly appointed President of the Americas.
Patrick brings more than 25 years of enterprise software sales experience.
And not only he's a proven leader.
Great person.
Tremendous fit into the organization.
I couldnt be more happy to have been joined Doc and the team to lead our largest market.
With that I'm now pleased to hand, it over to our newly minted CFO and of course that we think that what they are conversation Barbara Larson Barbara over to you.
Thanks, John I appreciate the kind words, good afternoon, everyone and thank you for joining us I look forward to working with all of you over the coming quarters and years and I'm thrilled to be joining Aneel, China N. P. Today to update you on our progress.
I joined Workday seven years ago, and have witnessed unbelievable growth in the company over that time, one observation I'd make is that our market position has never been stronger and the broad based momentum that we saw across the business in Q4 and served as a great validation of that.
Now, let's turn to our results.
Subscription revenue was 1.23 billion in Q4, representing year over year growth of 22%.
For the full year subscription revenue was $4 five 5 billion growth of 20%.
Professional services revenue was 147 million for Q4, and 592 million for the full year.
Fourth quarter revenue outside of the U S with 348 million, representing 25% of total revenue.
24 month backlog at the end of the fourth quarter was 798 billion growth of 22%.
This strong result was driven by new bookings outperformance and continued strength in renewals with gross and net retention rates over 95% and 100% respectively.
Total subscription revenue backlog was $12 eight 1 billion growth of 27%.
Our non-GAAP operating income for the fourth quarter with 237 million.
Resulting in a non-GAAP operating margin of 17, 2%.
As expected our non-GAAP operating margin declined from last quarter, driven by an accelerated pace of hiring the rollout of our previously mentioned cash based performance bonus.
And other growth investments made across the business, including the recent friendly acquisition.
For the year non-GAAP operating income was a record at 1.15 billion or 22.4% of total revenue showcasing the strength of our business model.
Operating cash flow for Q4 was $615 million, bringing our full year operating cash flow to $1 six 5 billion growth of 30%.
Record cash flow results were driven by solid operating income performance as well as strong cash collections throughout the year.
Our largest investments continue to be in our people and attracting top talent to workday we.
We successfully added and integrated roughly 1000 net new employees in Q4.
Including over 140 from Bentley.
In a year with more than 15200 employees growth of 21% and in line with our hiring aspiration. When we entered FY 'twenty two.
The record hiring is a testament to our culture, our global brand and the significant growth opportunity that we have at.
Overall, we are very pleased with the strong company wide execution in our seasonally most important quarter.
Turning now to guidance, we are encouraged by the significant momentum in our business and we're optimistic that the environment will remain robust throughout FY 'twenty three as organizations continue to prioritize and in mass and Theyre strategic finance and HR transformation initiative.
With that context, we now expect FY 'twenty three subscription revenue to be in the range of $5 five 3 billion to $5, five 5 billion, representing 22% year over year ground.
For the first quarter of FY 'twenty, three we expect subscription revenue to be between one to six 3 billion and 1.265 billion, representing 23% year over year growth at the high end.
We expect subscription revenue to increase sequentially by approximately 7% in Q2 and approximately five 5% in Q3 and Q4.
We expect the 24 month backlog to grow approximately 22% in Q1 of FY 'twenty three.
We are expecting professional services revenue to be approximately $160 million in Q1 and $650 million for the full year.
We will continue our title I met with our growing partner ecosystem to help ensure customers have successful implementations that support the highest levels of customer satisfaction and business value.
From a margin standpoint since the onset of Covid, we have demonstrated the scalability inherent in our model.
As we've discussed however, investing for growth remains our number one priority.
In FY 'twenty three we plan to continue hiring across the company at a rapid pace with.
With a focus on sales and product.
We are also expecting a return to travel and in person events.
And as we have discussed we have rolled out our performance based cash bonus program across the company.
Given this ramp level of investment and taking into account our increased revenue outlook. We are raising our FY 'twenty three non-GAAP operating margin guidance to 18, 5%.
Investing for growth remains our focus and we will continuously evaluate gross margin tradeoffs that we're currently expecting tourism margin expansion in FY 'twenty four and have continued confidence in reaching 25% margin at 10 billion in revenue.
We estimate non-GAAP operating margins of approximately 19% in Q1 and expect a normal seasonal sequential decline in Q2, as we invest in our people through our annual compensation process.
Yeah.
The GAAP margins for the first quarter and the full year are expected to be approximately 28, and 24 percentage points lower respectively.
On a non-GAAP margins.
The FY 'twenty three non-GAAP tax rate remains at 19%.
We expect operating cash flow in FY 'twenty three to be approximately 1.65 billion flat from record levels in FY 'twenty, two driven by the ramp in growth investments the corresponding decrease in margins and an estimated $80 million one time tax payment related to the expected.
Transfer of acquired intellectual property.
We expect capital expenditures of roughly 475 million in FY 'twenty three to support continued business expansion and phased return to office with investments across our existing facilities corporate it infrastructure and customer data centers. This includes opportunists.
Next data center investment that was previously planned for FY 'twenty four as we manage the supply chain and plan for future growth.
And finally, I'll close by thanking our amazing employees customers and partners for their continued support and hard work, which allowed us to deliver exceptional results during yet another unprecedented year, we're more confident than ever in our long term opportunity ahead.
With that I'll turn it over to the operator to begin Q&A.
Thank you.
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As a reminder, we ask that you please limit to one question.
Our first question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question.
Alright, Thank you very much what our finish to the fiscal year.
Several metrics to that but I need I'm, just curious to get your take so the number of transactions in fiscal 'twenty two are up 67% of your.
Total subscription backlog if I heard you Greg was up 27% then you know.
Close to 70% of Fortune 500, and I think the number was about 50% not too long ago.
Clearly an acceleration in your reported results and you're calling for acceleration in fiscal 'twenty three as you look at this what is the best way to look at your longer term targets news there or are we talking a quicker towards that longer term target.
Just at a very high level. Thank you so much.
Okay.
Thank you for the question Kash.
This was a phenomenal year.
Fastest growth we've had in several years from a from a new ACD bookings.
Perspective, I first want to thank the team Doug Robinson in China for for driving Great results are.
I also think it comes back to existing customer satisfaction.
And a growing product line and that that combination.
With the innovation that we're building into these products I think is really driving that growth also you know I think for anybody that was going through the pandemic and we're still on premise. It was really tough to run your business with with those kind of applications and so.
As you know it was just close the pandemic was I do think it was a forcing function.
To move to the cloud for.
For for the ability to run your business remotely or at least in a hybrid manner and we benefited from that and I also think the competitive landscape continues to you know to be.
Positive for workday so.
Very optimistic going forward and.
You know, we'll see where it goes but we're very optimistic going forward.
John or anything that.
Nothing too Neil maybe the only clarification gosh, they're 70 per saying he sold the fortune 500 within the financial services vertical, but we still of course have a great market share north of 55% when the world Fortune 500.
And I don't know if casually when we say the transactions were up 67% to me.
That's just Austin that means the customers are really using our product and getting value from our products. So while our growth rate.
Revenue wise, it's about six 7% the transaction numbers to say that people are our customers are getting value from using the system and growing a lot faster than we are.
Yeah.
Our next question comes from the line of Kirk <unk> with Evercore ISI. Please proceed with your question.
Yes, thanks, very much I'll echo the congrats on a nice end of this fiscal year.
John I was wondering if you could just talk a little bit more about the international opportunity is as you look out to calendar 'twenty to fiscal 'twenty three.
Where do you think you are in say APAC and EMEA in terms of getting into those bigger sort of core fins deals or HCM is obviously, a little bit more wide open for you all outside the U S. So can you just give us an update on international and kind of what your plans are for the go to market in that area. This year. Thanks.
Thank you Kurt.
We saw noticeable improvement on our international markets. This last fiscal year, we see great continued momentum, which is reflecting on the pipeline in FY 'twenty three.
We have a healthy growth across regions with significant wins at companies such as National Australia Bank, Jim Pack and the University of Melbourne, our leisure among others.
I would say is new customer base grows internationally, we are adding sales capacity in our customer base teams internationally as well.
Finally peak all has also help open new customers and opportunities for us and they had a really strong ordering EMEA are landing new customers, but just as a reminder, curt.
International remain one of the largest opportunity for us and we're really in the early innings of the journey, but it's having a great foundation on proof points, we say many reference of old customers across HCM on financials at this point.
Thank you. Our next question comes from the line of Mark Murphy with Jpmorgan. Please proceed with your question.
Yes, Thank you very much and I'll add my congrats on a great finish to the year.
I wanted to ask you about the procurement opportunity because.
Aneel I believe you mentioned, 50% new a C V growth in strategic sourcing and I think you said it was faster growth.
Growth in procure to pay so I'm curious if the if there is any extra type of tailwind on the procurement side.
Due to reopening or anything else and just whether those results increase your conviction to try to invest more aggressively into procurement as a major focus area.
Well, so mark I'd, just say, we're going to continue to invest aggressively.
On the procurement side.
It's a big market opportunity our products are strong, but there are gaps that we need we still need to fill.
I think the growth rate was.
Attributable both to be interested in the space, but also the attached financials. There's just a lot of companies that want to buy finance and procurement together from one vendor in a unified way with people that want to buy best of breed.
They want to buy them in a unified way and in the cloud where we are a great solution and I think that's becoming more and more of the case so.
I think that.
A lot of that success through that unified view between procurement and finance, which historically work closer together anyways.
Thank you.
Doug you want to add anything.
Let's say at Aneel.
Thank you. Our 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 and congratulations on a great tend to FY 'twenty two.
I wanted to talk about the increase of this attrition revenue get up in that subscription revenue guide by two percentage points is no small feat when youre talking about a revenue base as big as what you guys have in the no momentum necessary to make those changes and such a big subscription base can you talk to us about what happened in Q4 there.
Gave you guys the confidence to.
The the revenue guide and in that fashion and then on the on the backlog side of the equation at the beginning of last year, we were talking about expiry base and how that was a headwind to growth on the 24 month backlog, but you guys talked about a couple of percentage points does that become a tailwind now is as we start to anniversary.
And can you talk to us about where does that tailwind if it does exist where does where do we see that and how long into the into the year with that persist. Thank you.
I'm going to make one very quick comment and hand, it over to China.
I'll, just say that we wouldn't up the guidance.
The way we did it if it was just based on Q4 it was a super strong year.
Q1 through Q4 every quarter was better than our plans and so as we think about the future I'm going to turn it over to China, but we would never we would never up guidance just one quarter.
Got it thank you Danielle and thank you for you.
Sorry, Anna.
Okay.
Thank you for your question Keith I'll make a comment on that hand, it over to Barbara I think is then you know first of all it is the investments we've been doing from a go to market and product perspective, they are paying off with the you know undeniable, let's say positive trends that COVID-19 is creating within the back office and the relevance of diesel.
Loosens, we bring to the market the pipeline momentum that we have been seeing for several quarters now Keith continuing in Q4. So we enter FY 'twenty three with healthy growth in pipelines I always say it is across both net new customer base and also HCM and financials.
So healthy pipelines say combined with the favorable growth rates that we've been seeing is what is giving us the confidence and the momentum that we're seeing in the market, but barbara or anything to launch yeah, I'll just round it out with the an answer to your question on backlog. So as both inland China mentioned, we've got significant momentum.
Entering FY 'twenty, three and you see that reflected in our backlog guide for Q1.
With respect to renewals specifically are as we've said we are expecting to return to a more normalized rate of growth for our renewal base in FY 'twenty three so therefore that headwind that we faced over the last year to 24 months backlog does go away this year.
Got it would it be correct to think of it as a tailwind now or is it just kind of neutral in it it's just a normalized operating environment.
It's best to think of it is neutral and it's it's kind of more of a normalized growth rate this year.
Great quarter guys. Thanks, so much.
Thank you.
Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.
Hey, there. Thank you and congrats from me as well, maybe maybe one on margin you set the stage for some of the impacts there a few months back you already bringing targets up there as well for fiscal 'twenty. Three you mentioned still some moving pieces with return to travel we know it's a tight labor market. So maybe you could just add some more around what gives the confidence to bring those targets.
Up here and any additional color or commentary around the pace of hiring them. It's also appreciate it. Thank you.
Yeah, absolutely I'll I'll give you some specifics on the margin. So we are planning to add more head count this year than we did last year again with a focus on our sales and product. If you think about hiring last year. It was weighted more towards the back half of the year, we've got that hiring engine ramps now and we expect.
To add head count relatively even evenly throughout the rest of the year this year.
We also are planning to layer back some of the costs back into the business that will return to office travel are the in person events. We're all here together today sitting at S. K L. And then finally, just a reminder, that our company wide bonus program did roll out in Q4, and this has a full year impact of a proxy.
<unk> 300 basis points in FY 'twenty three.
But if I were if I were to start with the headline the headline is our higher growth rate.
It does cover some of it and let's just start with that but the higher growth rate gives us more.
Ability to drive a higher margin.
In addition to everything that all sets out Barbosa.
So helpful. Thank you.
Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.
Oh, great I'll Echo the congratulations on a real nice quarter, guys and thanks for taking the question.
Just one on verticals I know this has been a big focus and certainly for fins and for ERP financials. It's not a one size fits all are there any industries, where you're further along here are ones that we should expect to be come more incremental contributors from here. Obviously financials is the key one you've got a lot of success there.
Are there others like that where you could get to the kind of penetration you've seen.
And in the near term. Thank you so much.
John do you want to take that.
I'm happy to take it.
Hopefully hope all is well clearly financial services I think very importantly, right along as well the core fins wing with accounting center around the restaurant solutions from U S Bank.
On solid they're great customers going live with our financials vertical and what we mentioned when that 70% plus of the Fortune 500 financial services companies being already customers health care as well performed in Q4 brought including strategic wins at companies like Marsh Janiero Bringdown on wireless to our health and separate at all there.
I commented on my remarks notes as well as extend solution and customers like advocate over on some older is expanding our portfolio.
Hi gear higher education that we've been mentioning and we have some significant momentum.
Including us well some go lives on some more customers joining our students solution as a whole last but not least I think you are aware. This year, we will start with they all were authority to operate in the spring we can defend it all market and that is more of a long term. One so you should not expect significantly impact this year.
But clearly you should expect that it will be a growth growth vector for us going forward.
Great to hear thanks Jonna.
Thank you.
Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question.
Hi, This is strecker back to you on for Alex Thanks for taking my question.
When we talk with partners there just seems to be an ever increasing focus on the same side of the business. So can you talk about that pipeline. Some more and then if you have seen or expect to see any bottlenecks related to a tougher hiring environment or tighter labor environment for the S side and then just a quick second one does your guidance assume any.
The increase conservatism coming out of Europe , given the situation between Russia and Ukraine.
On the finance side, and then I'll turn with China on the finance side.
We feel very good where we are a product wise I think size are already.
It's definitely the function took a hit during COVID-19 , because we were viewed as longer term projects, but those projects are coming back online very quickly, it's not back to pre COVID-19 days, but it's coming back and Thats a very positive.
Very positive.
Data point for us.
And candidly as it relates to finance it really just is a two horse race between us and Oracle and Theres plenty of room for both of us.
Who is doing well we're doing well.
As the market comes back.
There's a huge growth opportunity.
For both of US and John you want to talk about Europe .
Yeah.
Comment on the partners Im talking about Europe , I mean, we are focused on ensuring that we don't have any bottlenecks on the partners in our ecosystem and we feel good of where we are as a matter of fact I'm, having some discussions with partners. This week and it is quite exciting kind of investments that they are planning within their finance and you know programs. So that's that's great to see.
I'm not sure of what was the question regarding Europe , which I think will more a macro one if I understood correctly it.
It was related to the guidance I can go ahead and answer that we haven't built in any increased conservatism as a result of that the geopolitical environment right now.
Thank you very much.
Thank you.
Our next question comes from the line of Brent bracelet with Piper Sandler. Please proceed with your question.
Thanks for taking the question here and good afternoon, Neil you had me at the fastest growth in new ACD bookings in five years.
I wanted to walk through and drill down into the the why now I appreciate doug's commentary around this big opportunity to sell into the installed base is that really resonating or are there other industry factors be it labor shortages driving a need to invest more in HCM.
Or just a return to office, that's also contributing to the acceleration here in new ACD bookings any color there would be helpful. Thanks.
Honestly, you you kind of answered the question.
As all of the above.
I talked to so many Ceos during COVID-19 , who just wanted to know.
Other employees were doing and their engagement levels pick on it's been a great acquisition that way.
Uh huh.
Everything about comp everything about engagement retention everything and if they had a legacy system. There were struggling and so that was a driver on the car side.
And.
We're turning back to work all the things you mentioned matter I'm, a I'm going to.
I'd like to answer it but I think it was China when does that really drove this great success over the three years or so I wanted to turn it over to China to give you his perspective.
I think you can provide a great context, nearly if I may add I believe there are undeniable market trends in our favor. It once you mentioned a significant amount of digital transformation happening across many businesses in all industries and we're truly the backbone to enable those transformations and really the only cloud first solution doing.
So across HCM finance.
Legacy systems that are built for the old ways of doing business and can support current business models and business agility and you had mentioned the need to engage better with employees at changing workforce skills understanding. So yes to name a few these are all C levels and feel discussions that we're having.
Frankly, we are really well positioned to provide solutions to those challenges.
Partner to help our customers to transform.
Helpful color. Thank you.
Okay.
Our next question comes from the line of Brad Zelnick with Deutsche Bank. Please proceed with your question.
Great. Thanks, so much and congrats not only on the strong result, but the breadth across Geos products you know various segments.
Install base and new a C V. I mean, it really sounds like a strong finish and I know we've touched on verticals a few times in the call.
And you've you've featured financial services you called out retail is particularly strong in your press release, we've picked up strong things happening in education, and sled more broadly and in other verticals and I'd just be curious if maybe you can comment on some of the verticals and opportunities that we might be talking about a year from now.
And things that might be brewing and maybe even some of the concerns around service based industries hospitality leisure.
Travel the extent to which they're bouncing back thank you.
I'll comment on higher Ed and government and then I'll, let John talk about the future, but we've had a commitment to higher Ed and state local government.
Since we started the company, but not not too far afterwards.
That was a big focus of daves as it relates to higher Ed.
And a lot of the state and local suffer are intertwined with higher Ed. So we continue to be very strong. There that was that was our first industry slashed vertical we went after.
And as the students system that we're building gains more functionality is becoming more accessible to a larger larger universities.
It's a great solution for a university you buy the higher you by the student system and you can get HR and finance.
Along with that and then in the case of public sector state local government.
We have worked to build all their unique rules into the product so.
You see it in cities you see it in the states.
Quickly adopting workday so that is a market that's probably our first vertical before financial services and then Charles can talk about what comes next.
Yeah, I think what comes next as I mentioned before the fed article grooming. It remains of the large a large on premise for opportunity for HR and financials application and we see really a great opportunity there to provide cloud solutions for a significant portion of the market I mentioned before I'm Oh authority to operate coming on.
Spring game I think you should also think about them on the core services verticals, because you know the wins that we have like in used box now and core financials on the momentum we see in the pipeline hopefully that we keep progressing and you'll see us gaining traction there and last but not least you know.
With those let's say core services verticals, where core financials, some financials basket takeaway over all apply and they are better I think our land motions with planning sourcing peak, calling them binley will allow us to even penetrate farther on dose verticals.
Outside of our more natural let's say ones where.
There are no maybe I know might be ready yet to transform core HCM or financials, but definitely we are ready to launch on Juno and take advantage of some of the solutions we provide there.
Thanks, very much for the color.
Thank you we will now take two more questions.
Our next question comes from the line of Brent Thill with Jefferies. Please proceed with your question.
Channel you mentioned healthy activity in medium enterprise I'm curious if you could elaborate on what you're seeing there.
In the medium enterprise is being executed really well for quite some time now we've been highlighting that while we see significant long term opportunity. We see indeed, the second thing and this continued to be a significant investment and focus for US I think we've done a nice job of tapping into that market and figuring out a way to.
<unk> right sized that deployment costs with our balance sheet investments and we are really well positioned with the broader platform solution.
Honestly the team has been doing extremely well growing significantly faster and we're excited by the momentum in the pipeline and the investments that we're doing until that market.
And was there a as a quick follow up was there any a follow up on what Youre seeing with planning uptake I know that's been one of your stronger growth areas any any color there would be helpful. Thanks.
Yeah planning as you know is a core focus for us as part of our fins plus approach that has being a gas solution that has benefited from the trends out of call. It and we're pretty happy how we are doing regarding planning overall under our principal customers. We do have and we do have more investments coming on to that solution.
As part of our land motion.
I'm more cell, especially as Jess are supporting those go to market Air Force, particularly this year and going forward.
Thank you.
Our final question comes from the line of Raimo line Shell with Barclays. Please proceed with your question.
Thank you. Thanks for squeezing me in and congrats from me as well channel I wanted to go back to a question I asked last quarter already in there.
About the evolution of pipeline.
Can you talk a little bit of what you're seeing there because if it all plays out well then actually this quarter that should have been more for the next year and I guess you know the.
Increasing guidance shows our confidence as well.
But and also how do we have to think about the increase in Capex, but you pulled forward 24 spending into next year that all seems to suggest that that post pandemic build out of the pipeline and changes in the pipeline continues here, but maybe a couple of words on that one and congrats from me as well. Thank you.
Thank you Raimo I think the way to think about the pipeline is that theres. Good momentum as I say that has been building during the last few quarters and we also saw that in Q4 and I think he is broke base is across net new and you know Aneel you mentioned some of the results in Q4 with Delta extraordinary performance of that team is.
The wrong customer base is around HCM financials.
From a regional perspective, we see the buttons as well in North America, but also the rest of the world. So I think that's the way we look at it in the right way of thinking about it going for war. So there's no more question turning onto the execution and the investments we are doing within the new go to market and sell say Fox.
Joining really enabling them properly to appropriately position the value proposition will keep our conversion ratios as we've been performing within the last this last FY 'twenty two.
Yeah.
Thank you.
Ladies and gentlemen, thank you for your participation on today's conference. This will conclude work these fourth quarter FY 'twenty two earnings call. Thank you again for joining us.
Okay.
Hello.
Yeah.