Q2 2020 Earnings Call
Thank you for your patience.
Ladies and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
Welcome to workdays second quarter fiscal year 2020 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 and with that I would like to hand, it over to Mike Girlfriends, President business Finance and Investor Relations.
Welcome to workdays second quarter fiscal 2020 earnings conference call on the call, we haven't Neal bursary, our CEO Robynne Sisco, our co president and CFO Chano Fernandez, our co President and Tom Bogan, Our executive Vice President of the business planning unit.
Following the neo and Robbins prepared remarks, we will take questions.
Our press release was issued after the close of market and is posted on our website, where this call is being simultaneously webcast.
Statements made on this call include forward looking statements regarding our financial results applications, new product offerings customer demand operations and other matters. These statements are subject to risks uncertainties and assumptions. Please refer to the press release and the risk factors in documents, we file with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q for 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'll 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 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 third quarter quiet period begins on October 15th 2019.
Unless otherwise stated all financial comparisons in this call will be to our results for the comparable period of our fiscal 2019 without let me hand, it over to Aneel.
Thank you Michael and Hello, everyone. Thank you for joining us today.
I'm pleased to share the details of another very good quarter in Q2, we continued our momentum as we partner with our customers to drive digital transformation across cloud finance and HR.
Let me share some of the highlights beginning with HCM.
As of today more than 40% of the Fortune 500, and approximately 50% of the Fortune 100 have selected workday for the core HCM platform.
And as we continue to expand our efforts globally.
17% of the global 2000 have also selected workday for their core HR system of record.
And the second quarter some of the new customers. We added included the gap.
Stanley Black <unk> Decker and Rockwell automation in North America, LDR stores limited in Europe , and Bunnings Group limited in our Asia Pacific Japan region.
Our continued success globally is a direct reflection of the value we place on live happy and Referenceable customers.
No. We'll go lives in Q2 included Deutsche Bank Home Depot, and PNC Bank.
Our customer satisfaction rate remains amongst the highest in the enterprise cloud software industry, and assess where customers an incredibly important part of our enduring business longer term.
Shifting to cloud financial management, we had another strong quarter with approximately 50% revenue growth in Q2, we added a fortune 100 insurance company, which is another in a growing trend of financials first customers. In addition to this larger customer. We also added the city of Baltimore, Veolia UK and the government of Singapore.
These are just a few of the many new customers, who selected workday for our core financial management applications in Q2, bringing our total customer base for this product line to over 725.
Also an equally importantly, we have several customers go live on financial management, Q2, including HR Block Loews Corporation and Shake Shack.
In addition to the strong performance from our core financial application, we continue to see great opportunities with adaptive insights business plan and cloud as we officially lapped the one year anniversary of the acquisition.
In Q2 adaptive insights added over 200, new planning first customers and over 45, new platform, an up sell deals to new and existing workday customers.
We believe that with the depth and breadth of our cloud based finance products in combination with our industry, leading HCM suite.
Workday prism analytics and the adaptive insights business plan cloud.
We're delivering a global solution that is highly differentiated and critical for empowering business leaders to plan execute analyze and extend all in one system.
And powered by machine learning.
We're continuing to invest in areas that leverage our strengths and open up new market opportunities.
I'd now like to spend a few minutes talking about innovation.
As you know innovation is a core value and part of our DNA at workday.
First of all I'm pleased to share that fast company recently named Workday. That's one of the 50 best workplaces for innovators.
We're very proud of that distinction that even as we maintain a very fast pace of employee growth around the world Our company culture around innovation remains strong.
We have a lot of product innovation as we look ahead to our upcoming workday three three relief and I'd like to mention just a few.
First for HR, we continue to hear from our customers that addressing today skills gap is critical as they look to better develop and re skill their workers and prepare their workforce for the future.
We continue to leverage machine learning built into the core of workday to broaden our skills cloud offering with two new features skills minor in skills insights.
To help customers better understand and manage skills across organizations.
If the answer management, we're using machine learning to detect anomalies anomalies will be flagged as they occur.
Affording users an opportunity to detect and correct potential reconciliation issues when they happen rather than during the high pressure month end close.
And on the analytics front, we're making data insights available to all for both finance and HR with data discovery boards for Workday financial management and worked age him well I'm users to quickly visualize data type patterns and discover insights all within workday.
We look forward to sharing more about our product innovation customer success and market opportunity in October at Workday rising our annual customer conference. The financial Analyst Day takes place on October 15th in Orlando, and we look forward to seeing many of you there.
And now over to you Robert.
Thanks, Aneel and good afternoon, everyone.
We delivered solid second quarter results with total revenue of 888 million, reflecting year over year growth of 32%.
Our subscription revenue was 757 million up 34%.
Professional services revenue came in at 131 million up 23%.
Revenue outside the U.S. was up 35% year over year to 211 million, representing 24% of total revenue.
Subscription revenue backlog was 7.3 billion growth of 27% year over year.
Growth was driven by solid results across net new bookings add on business and net retention, which was once again over 100%.
Also impacting Q2 backlog growth was a duration headwind of approximately 1%.
Subscription revenue backlog will be recognized within the next 24 months was 4.77 billion growth of 28%.
Current unearned revenue was 1.8 billion in Q2, a 29% year over year, well total unearned revenues grew 27% to 1.89 billion.
Our non-GAAP operating income for the second quarter was 118 million, resulting in a non-GAAP operating margin of 13.2%.
Margin over achievement was driven by a combination of topline over performance and the shifting of certain expenses from Q2 to the back half of the year.
Operating cash flow in Q2 was 100 million.
We continue to invest in our people and in attracting top talent to work day.
During Q2, we successfully added an integrated approximately 470 net new employees, bringing our total workforce at the end of the quarter to over 11400.
We continue to execute very well operationally and are pleased with our solid first half results.
I'll now turn to guidance.
Our focus remains centered on investing in our products and other areas of the business to support our long term growth aspirations.
Based on our over performance in Q2, but keeping in mind, we face very difficult second half comps from last year, we're providing Q3 and full year guidance as follows.
For subscription revenue, we're raising our F Y 20 estimate to be in the range of 3.06 billion to 3.07 billion, 29% growth at the high end.
We expect our Q3 subscription revenue to be 783 to 785 million, 26% growth at the high end.
We are raising our professional services revenue guidance to 520 million for fiscal 2020, as we continue to focus on driving the highest levels of customer success.
For Q3, we expect professional services revenue of 135 million.
For non-GAAP operating margins, we estimate Q3 to be approximately 10.5% and we still anticipate 12.3% margins for the full year.
The GAAP operating margin is expected to be lower than the non-GAAP margin by approximately 28 percentage points in Q3 and for the full year.
We still expect subscription revenue backlog growth in the low twentys in the second half and there is no change to our F 20, operating cash flow guidance of 790 million.
We continue to expect the full year capital outlay for owned real estate projects to be approximately 130 million of which 95 million relates to the development center in Pleasanton.
There was no change to our fiscal 2020 plan of 280 million for other capital investments to support our customer growth and continued business expansion.
I'll close by thanking our amazing customers partners and employees for their continued support and hard work.
We had a solid first half of the year and we'll continue to focus on our customers success.
We look forward to seeing many of you at workday rising in October as we share more insights on our strategic product initiatives and long term market opportunity.
Operator, let's begin the Q and a process.
And at this time I'd like to inform everyone in order to ask a question press star one on your telephone keypad.
To withdraw your question press the pound key.
We will pause for a moment to compile the acuity roster.
Your first question comes from Richard Davis from Canaccord.
Okay. Thanks, very much so I talked with the early user of your platform as a service and they say like it makes sense you know, there's obviously a few little that's what they're working on and stuff like that but the thing they really like the best was you're not kind of pigeonholing them into a specific database and things like that but I guess the main question as you know what point does this kind of become widely available or is it what are the gating issues that we need to address to kind of make this thing you know running full speed and fully available. Thanks.
Hi, Thanks for the question Richard.
It's it's available today and what we call limited G.A., which means it is actually widely available, but it's around a set of a well defined npis in particular areas of the product.
And going into next next year, a 2020 calendar 2020, we expect to have the a broader set of npis available, where we would will be in true general availability across all aspects of the product line.
Got it and then.
A quick follow up on technology, you know one of the things that I was talking to someone at wake Med and they just said one of the big problem stands all but credentialing what they do is all in paper and you guys are right.
I don't know what your yeah.
System of record for people is there a way that you could.
You know digitized that stuff you know you know safe way. So it's not so much private and stuff like that because it's not just driver's license, but it's.
Oh Records and all this other stuff and all that you are you guys working on that direction, we actually introduced workday credentials, which is exactly what you described at our altitude conference just a just a month to month back which is our in our professional services.
Conference for both our professional services and our partners professional services people John was Euro actually wrote a blog, which you can see in our website about workday credentials and you learn you will see a lot more about it at workday rising it's a very exciting new area for us it's been under development for 18 months and it accomplishes exactly what you.
What you described Richard.
Perfect. Thanks, so much.
Your next question comes from Brent Bracelin from Keybanc capital markets.
Good afternoon, one for Neil and one for Robin if I could Neil if you look at the international expansion strategy, you talked about I think having only what 17% 17% penetration of the global 2000, it looks like a international revenue is less than 25%. The business can you just remind us where you are at relative to international expansion. What are your efforts there to kind of really accelerate the footprint internationally. Thanks.
So I'll I'll take a crack at that than Alaska are our president Chano Fernandez to weigh in as well.
We're we're very focused on selling to large multinationals and so as a result.
Oh, we focused on the large national multinational markets UK, France, Germany.
In Europe , Japan Korea.
Those really have been the big markets outside the U.S. moving into Mexico, but it really has followed the sort of the G.H.G. 10 countries and I would say at this point, we're pleased with the results we've actually done quite well in the Asia Pac region in Australia, New Zealand as well, it's still early on and it's it's a combination both of us going into those markets and those markets just coming online into into moving into the cloud for HR and finance more aggressively I'd say the market is.
Outside the U.S. is three or four years behind where we are you know we are in the U.S. today anything you want to add channel.
And I would like to highlight that a us on eightys, commenting we're pleased with the progress on Brussels seeing our international markets remain very focused there I think on top of our tradition on large enterprise say how close we are.
Really having an seen greater we sold some success in the media enterprise seems we too said to seeing implementation and I'm I'm, probably you could miss with all of the throne day from the U.S. into markets like your money Nordiques, France on some old Irrs on we're seeing great traction so.
You know early days.
A lot of opportunity is tend to be got sure from last year international markets, but a great customer satisfaction, so far I agree prolaris.
Helpful and one quick follow up for Robyn just looking at the calculated billings growth. It looks like that peaked last year. During Q3, it at a 40% year over year, how should we think about that compare or you're talking about I think 20% plus growth in the second half, but should we kinda can put consideration around our calculated billings growth assumptions for Q3, given that tough compare a year ago.
Yeah, I mean, we've got tough compares across all of our metrics in the back half of the year. So definitely keep that in mind I would expect that our earn on earned <unk> growth rates would be largely in line with Oh subscription or revenue backlog numbers that we gave you. So you can infer from that what billings would be.
Okay, great. Thank you helpful color.
Your next question comes from Mark Murphy from Jpmorgan.
Yeah. Thank you Neil just given all the headlines and crosscurrents that are out there. We have had a few software companies start to encounter some problems are driven by Brexit or the trade situation.
You are looking at this in contrast, your results and guidance, they're showing real health real consistency. So just curious if there is anything worth mentioning on the macro side in terms of business confidence are you know what you're hearing from other CEO is whether whether they have any any incremental concerns or not.
So.
You know when I look at our pipeline across all the product lines that are very healthy. So we're not seeing any impact on our pipelines.
But there's no. There's no question, there's uncertainty in the air and I think the Ceos you talk to the closer they are too.
Doing business in China, the the the more uncertainty they feel so so I just think we're taking a we're taking a wait and see and listen to our customers.
Well, we haven't seen any issues in the pipeline, but the way that it would materialize I think for most tech companies would be seeing things slow down, yet, which which we haven't but.
I know theres a lot of uncertainty in the air and we're trying to we're trying to read the tea leaves the same where you are.
Okay that makes sense.
As well as Robin I wanted to just mentioned, it's great to hear you're adding a fortune 100.
The company has the financials customer and I'm just curious what.
Are you inferring from having a in enterprise of that kind of scale you know moving forward with financials first I think it's how you described it because that's.
That's been so where in the past. So just kind of wondering is it is it a reflection of a product to maturity or enterprise readiness or something else.
Yeah, Mark I think it's actually both of those things we had mentioned a couple quarters ago that we were starting to see financials first large financial's first deals in our pipeline, which had been a change a week.
We'll see those I would expect that those wins will be lumpy as with all of our large deals and that they'll kind of ebb and flow, but I do think we're at a convergence point now where our product is ready and has been for a while and now the market is ready up another large enterprise space as well.
Thank you.
Your next question comes from Mark Moerdler from Bernstein Research.
Thank you very much I appreciate.
Congrats on the quarter.
Good to two separate questions. First one is are you seeing any change in the number of opportunities or the size of the opportunities entering the pipeline full financials trying to get a sense of how the early stage of that pipeline is starting to mature and then a follow up question.
I think came markets we've been commenting we we I mean, when I look at the pipelines for financials second half and beyond we're pleased we would would we have funds would would be didn't deem both seem to U.S. on.
Under the rest of the World, we're seeing more traction I mean, a couple very constant very consistent with what we commented before those are mainly financial services health care and a lot of opportunities, but yes, we see that is moving up market and yes. He isn't growing our finance on five planes Foster clearly that now we're talking about being on our core business lately.
Perfect excellent very helpful I'm going to ask given how good the quarter, including the quarter was I'm going to turn into something investors generally has talked about and that's the GOP margins perform margins are improving how should we think about when the GOP margins will start to improve churn.
What are the factors that can drive it any color would be interesting.
Yeah, So as you know.
Stock is a very important part of our compensation philosophy here at Workday and so we you should continue to expect that we'll spend you know a good portion of our revenue you know, 20% now, but you know nothing declining in the near future going forward. So as we reach towards that 2020 mid twenties non-GAAP revenue. That's when we would expect to start to look towards GAAP profitability.
Okay. Thank you I appreciate it.
Your next question comes from Kirk Saturday from Evercore ISI.
Oh, thanks, very much and congrats on the quarter I guess Neal is curious about your thoughts on adaptive <unk> a year after the acquisition just.
You know maybe some thoughts on how it's done I guess relative to your expectations, which anywhere where high going into it and maybe anything that's been surprising to you just on maybe a positive basis, whether it's you helped Stoke more conversations around the financial organization broadly, you're just maybe a little bit more color on kind of how that's panned out relative to what you thought a year ago to be great. Yeah. It's it's obviously been a great year.
Dave My co founder, Dave don't feel now were actually up and a plan for an all hands meeting there yesterday.
Well, Tom Bogan, our you know the CEO and my good friend.
And.
All the key people are out the company, there's a lot of momentum we've had a great first year.
Well, what I said, what I think we expected to happen was that the product would be a great fit up market with the workday customer base is played out that way.
And it's actually happened probably faster than either Tom or I would have imagined we've had some.
Really big wins like Airbus enough Astrazeneca choosing.
Choosing to be adaptive adaptive product line I think the the really a positive piece is that the standalone adaptive business has continued to be very healthy independent of being attached to workday and so so it's it's really has worked out.
Extremely well and I think it all starts with with with the most important thing very very similar cultures, we both care about our employees, we both care about our customers a high integrity places and so.
You know if there were five more adaptive he would probably look at looking at making acquisitions like that Unfortunately, those are few and far between but a really really a phenomenal first year.
No that's great and maybe just one quick one for Robynne Robynne, you mentioned more spending pushing into the second half of the year was it higher I mean hiring seems strong. So I guess is it just some one off items that are maybe pushing a little bit in the second half versus expectations. Yeah. We were slightly behind on hiring but nothing that was very impactful and nothing that's going to jeopardize all the good work that we have planned this year most of the slippage was what I would call program spend things like advertising and other types of programming initiatives that just moved out of the quarter and are going to start a little later in the year.
Sounds good thanks very much.
Your next question comes from Alex Zukin from RBC.
Hi, guys. Thanks for taking my question.
Hey, guys.
I just wanted to ask on maybe first time adaptive are you starting to see or maybe can you talk about the cadence of adapted a leading to more kind of core financials deals and I got a quick follow up.
Oh, there's there's no question. It's a it's it's helped on the pipeline for financials and I mean, the the key is if you were to look at at the CFO priorities planning his way at the top of the list.
And you know adaptive has a best in class planning product, both for finance and increasingly for workforce planning and so it's a great entry points and broadens. The conversation then if a customer is not.
Quite ready for core financials were still okay with that we will get in the door with planning can follow it up later, but I think it just it broadens the appeal. There's just there's just no question that broadens the appeal I think prism analytics does that as well so.
Having that that broader product footprint for for the financials or customer basis has been really important for us.
Perfect and then maybe just one for Robynne is there any way there conceptually think about the impact of adaptive on the subscription backlog.
Numbers or kind of how we should think about that going forward.
Yeah, so when we.
Bought them in Q3, and we disclosed that we had inherited 140 million of adaptive backlog and so we got that benefit Q3 of last year, which obviously impacted the bookings number as well so it's very tough comp for us starting in Q3 and into Q4.
Got it thank you.
Your next question comes from Keith Weiss from Morgan Stanley .
Excellent. Thank you for taking the question guys and congratulations on a good quarter you continue to make good progress, adding new customers into the fold and there's definitely kind of more to go particularly in international I wanted to take the other side of that equation in terms of the progress and up selling into existing customers, maybe get an update on how that's going on with sort of the broader on each hand portfolio and the ability to sort of further penetrate into somebody existing customers.
Keith and China speaking, we are pleased on how that business is doing in terms of the attach ratios I would say is starting we say.
Selling financials and back into where HR installed base on demand clearly planning freezing.
Crude main learning I think in most of our attach rates and how where products are doing very well, which is great. Because as we said before we're sticking off pressure for I'm not growth perspective from nickel race Yang.
We usually have discos handled those attach rates a number on that on the analyst day around working rising well show, we'll we'll do this year, but but stay tuned but a good progress.
I would just I think the it's been.
Really good progress since China put.
More dedicated focus on customer base, but we could also still do better as.
As we've embarked on a pricing study with one of the top consulting firms, it's very clear that.
We are still more geared towards a net new from new logos them from our customer base and that's probably different than the other or the other cloud peers out there.
So that's an area of high interest for us.
Got it that makes sense and then a follow up for for Robyn given the like said the uncertainty that and Neal is speaking to within the customer base I understand it's not in your pipeline, but that there does that impact your kind of forecasting methodology at all like in terms of the guidance you get to get anymore I'm conservative on on any kind of the.
The inputs that you guys use and but putting out the back half of the year.
So as you know we said all along that were more backend loaded this year than we have been in other years. So we've definitely taken that into account in our guide and we've got a large pipeline and we're focused on executing against that and we're looking forward to updating you more next quarter.
Got it thank you.
Your next question comes from Kash Rangan from Bank of America Merrill Lynch.
Hi, Thank you very much congratulations team on a fantastic quarter I wanted to ask a little bit about the core HCM product I know you mentioned that 40 personal fortune 500 have standardized on a on workday and then you also mentioned 17 70, 70% penetration the global 2000 and in markets like this where the number one player generally tends to get a dominant market share are we still targeting that kind of market share that you have with the fortune 500 on a global scale and so therefore I'm not to put words in your mouth, but how do you think or how sustainable do you think is the growth rate for the core HCM product line, especially given.
This is a difference between penetration levels of global 2000 versus Fortune 500, and what does the company need to do in order to get to that equally dominant position on a global scale as you have with the fortune 500. Thank you.
So you know I'm not going to I'm, not going to assign probabilities, but obviously aspirationally, we'd like to have the same.
Market share in this in the Fortune 2000 that we do in the Fortune 500 and by the way we're at 40% of the Fortune 500, I expect that to continue to rise. There. So there's still probably 200 accounts that have not made decisions yet. The fortune 100 was the first group to make decisions and then are we know we have a.
We're also around around 50% of the of the Fortune 100 for the rest as long as we can continue to execute and take care of customers I don't see why we.
We can't have a high penetration rates of the global Fortune 2000.
It's incumbent on two things number one continuing to expand globally and reaching.
Reaching those opportunities and they're not all in the countries. We're in there there are probably some opportunities that are in places that we're not yet selling to so we have to we have to factor that in and number two some of those markets says as we talked about earlier are still very early on in their cloud.
Migration and so that's that that's probably the most the most important focus for us is to be there as these companies begin to migrate off of their legacy systems, but.
You know its opportunities out there.
And you know it gives me.
It gives me confidence that the h. opportunity is continuing to be a a long term opportunity and there are so many modules that we can go back into these customers with him even modules, we haven't even brought to market yet so I'm very confident so it's a big enough market to continue to support our growth.
Wonderful and if you if you have a couple of words on replacement of legacy SAS installations is that still a tailwind for you guys as as it was the case a couple of quarters back and that's it for me. Thank you like legacy SAS, meaning failed.
Meaning either bolt ons that were replacing or.
We're or core systems of record that failed in the cloud exactly one of your competitors that you think that that will continue to be.
A trend for us and an opportunity for us when you get to that when you look at the.
Fortune 500 candidly neither of our large competitors have.
Have a real proof points over 100000 employees or even over 50000 employees that are in production and a huge part of our success has been not just winning the customer, but getting them into production and having them be happy.
Our I think the stats are we have.
Of the approximately 50% of the.
Fortune 100 that are.
That are using workday, 35% or other words or 35 of that 50 is already live.
Right. So that's that's that's a huge that's a huge advantage and when people will have a.
Failed project. The next six to 102 was.
Is it get the sure thing and make sure that it works and that's where that's where we hopefully come into play.
Perfect. Thank you so much.
Your next question comes from Derrick Wood from Cowen and company.
Thanks first one Aneel you changed up some leadership and leadership structure in your international regions. During the quarter could you just talk about the reasons for the changes or maybe just comment with the new leadership and structure kind of what you're hoping to sharpen your focus on.
I'm going to turn over that two out to China.
Yeah International remains say Derek International remains a very big focus for US we can assess sort of any station I mean, as we said we'd happy with the progress. We also said that there were a couple of countries, where we have opportunities for better performance on doing through.
So that's part of that process. We promote is someone we seen the company that has been with us for quite a few years time, we're very and really really excited about the opportunity ahead I personally I am.
Okay, and Robin you mentioned last quarter I guess this quarter again, it's more of a backend loaded quarter or back end loaded year, you maintained the low 20% backlog growth for the second half.
Can you just give us some color as to what you think around you know kind of Q3 versus Q4, and whether it's more weighted towards higher growth in Q4 any color. There would be helpful. Yeah dark it is more weighted towards Q4 than last year. So we had a more even distribution, particularly when it comes to the large deals last year than we have this year and we're seeing you know really backend loaded into not just the second half but into the second quarter and then on I mean, sorry, the fourth quarter and then on top of that we're facing really difficult comps from lapping the adaptive acquisition.
Okay. Thanks.
Your next question comes from Raimo Lenschow from Barclays.
He had two quick questions. Congrats from me as well and kind of go back to adopt is like when you got it and the only like a you know it was more focused on SMB and <unk>, but you kind of were convinced that the core technology was really good to scale. It up can you talk a little bit about the progress you've made there and then like tenants. Just one word also then on the partner evolution of the partner channel. Thank you.
So.
At the time of the of the acquisition of adaptive they had already been working on scaling the products and and rewriting their modeling engine for the biggest companies in the world. It was not well known to the marketplace. A they were not yet public but the work was well underway and we're very pleased with how that work has gone a big chunk of it got delivered in the earlier part of this year. It continues but we now have the confidence to sell to companies like Astrazeneca, an error and Airbus you know two very very large companies. So the the scaling efforts that a that was already underway has has gone really well there they have a world class.
Just say week, because we now but we've got world class development team on on a on the adaptive front and you know they they continue to.
Scale the system to the largest companies in the world and that really was that was really yet I think it's it was also the other part of it was in investment.
And the sales side for large enterprise, that's a big it's a big.
Cost I think if adaptive had gone public that would've been a big investment for them by becoming part of workday. They were able to leverage our high end enterprise sales organization immediately and that's that's paid big dividends as well.
Oh on the evolution of the partner Channel you know, we continue to to have a broad base of Ah.
Strong partners of course, we've got all the big the biggest size I think to be a the two big trends in this last.
12 months has been they're embracing of the financial product line and they are embracing of adaptive adaptive was historically not as close to some of the biggest size and that's the biggest size of have learned more about the products. They've got very excited and we expect that that set of partners are going to be very helpful to us in some of the larger situations that were.
That weren't in competing for right now.
Alright, thank you.
Your next question comes from Mark Marcon from Baird.
Hi, Good afternoon, let me add my congratulations I was wondering aneel if you could.
Elaborate a little bit more with regard to the heightened focus in terms of driving attachment within the existing client base.
Could you Dimensionalize guide in terms of the opportunity or and how long would that take to scale up.
And and how quickly do you think that would be visible.
From the outside.
You know I think we'll do that for you at the at the.
Oh user conference at rising we typically update that kind of thinking it's it's hard to do in a in a short call, but but we'll have that for you at the next.
Analyst meeting.
If there's a good where we're at we're at a and we've always been in the high ninetys of customer satisfaction.
When we come out with new modules are our customers on the margin tend to want to buy from us there's there's more opportunity there but.
Rightfully so the last three or four years have been focused on on getting new accounts, but now we have you know was a base that's closing in on 3000 customers for.
HR and 700 for financials and over 4000 for adaptive so we now have a big installed base.
And we probably need to.
Just start thinking a little bit about how to go back to that base, you know more systematically or or.
Not more systematically probably with a bigger footprint on the sales side.
Great and then with regard to the guidance you know typically the subscription revenue guidance has been conservative, but I understand the year over year compare you know looking at it from a seasonal sequential perspective. It seems conservative is there anything that would that would drive that just from a from a seasonal sequential perspective.
Well, yeah, we do have some seasonality in our subscription revenue, mostly between Q1, Q4, and Q1 and Q1 and Q2 sure based on the number of day. So we do get a tailwind in Q2, which then we don't get in Q3 in Q4 from from that you know obviously, we take a lot of things into account when we guide we take into account you know overall sentiment you know aneel talked a little bit about what he was saying the fact that this is a more backend loaded year than we've had in the past obviously is weighing on our guidance as well in terms of you know us having more to close now in this back half and we generally do halfway through the year. So we're focused on execution and you know as I said before well update you as we get to the back half of the year.
Great Congratulations again.
We will now take two more questions. Your next question comes from Karl Keirstead.
Oh, hi, Thanks, Robyn simple one for you you had mentioned three months ago that on the cash flow side.
Twoq would be quite limited.
100 million is a little bit more than a limited I I Trust what happened here is maybe some of the margin out performance.
Worked its way down to the cash flow line or where there are one or two other things that might have contributed to that overperformance. Thank you yeah. Carl that was definitely part of it. We also came out of the quarter with a stronger collections number than we had gone into the quarter thinking we would have obviously Q2 was a seasonal low for us and so it's it's a little hard to predict where we're going to land a quarter by quarter given that we do a lot of our business at the end of the corridors and invoices are due near the back half so whether they pull in or slight out is really a bit of an unknown. So we were pleased with our performance on on the cash flow.
Got it okay that was it for me thanks a lot.
We will take our final question from Pat Walravens from JMP Securities.
Oh, great. Thank you.
You know aneel in art checks this quarter, we actually heard good things about prism.
And so I was wondering if you could if you could tell us how how that's going and then maybe that would be an opportunity. Your your long time partner.
Spent 16 billion to bite have low so they clearly see some opportunity. So maybe that's a maybe you could work in your perspective, just for the analytics space in general.
I for companies like you and Salesforce Yeah. No you know prism Prism has a has been a strong performer continues to be a strong performer.
So we had another we had another very very good quarter with prism, I think where you're you're you're going to see it go up as more and more in the way of dashboards and usability that we that we highlighted in the and the prepared comments and a set of applications that that sit on top of prism people analytics being the first but you could see financial analytics spend analytics and this idea of package analytics is really resonating with our customers. So it's a big part of what we're doing and in many ways. It's.
It's the culmination of a lot of work to show when you have a strong transactional engine the kind of deep analysis, you can do with that with that data. So.
It continues to chug, along and we only didn't mentioned it just because its Q2 when we.
When we get to the analyst meeting in and a few months, we'll we'll show you more detail about what's happening with prism is very exciting.
Great. Thank you.
Are you happy for Mark and tableau, it's not competitive with with Workday, we actually use tableau in some situations internally I think a lot of companies do.
At the end of the day people are using our analytics to really focus in on the data types that we drive HR and financial data types and vice versa. So you know it's.
Probably a very good move for Mark and it's a it's a very it's a very good company that he acquired so.
Great. Thank you bet perspective.
That concludes the Q2 workday earnings call. Thank you for joining us today have a good night.