Workday Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Keith Weiss - Morgan Stanley - Analyst : Yes, exactly while we're still fresh and feisty. Before we get started, for important disclosures, please see the Morgan Stanley disclosure website at www.morganstanley.com research disclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. All right. With that out of the way, so Carl, we just came out of a solid quarter for Workday to end up your fiscal year. You talked about record kind of new FINS customers for the quarter and for the year, good traction with some of your newer AI solutions. Can you talk to us about Q4 and the year in total? What's been working for Workday over that period?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. A tonne of stuff to unpack there. I want to start off with a broader perspective. This is your two years plus in the role. When you came on board into Workday, you took a hard view at the company. And I think the conclusion that you came out with is that there is investment needed in go-to-market. You expanded out your international distribution, expanded out what you're doing with partners, looked at doing basically direct sellers as well to add to the mix. Basically, from my perspective, you came to the conclusion you guys were underdistributed. Is what we're seeing today the results of that? Like are those investments yielding now in terms of the partners, the international sales, the new sales leadership? Is that why we're seeing record [FINS] sales?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And then if we think about sort of -- or if you think about over the past two years, has there been any significant need for course correction on some of those initial views on where Workday has to go, on where you were trying to take Workday over the past two years? Like one of the things that pops to mind, I feel like we're talking a lot more about monetization of AI today than we were two years ago when you first joined.

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. I definitely want to dig into that. But before we go there, I just want to talk about sort of the environment that we're operating right now. You guys closed your FY25 well. But it feels like there's an increasing weight of uncertainty out there, whether it's tariffs, whether it's consumer confidence, whether it's DOGE. What are you seeing in terms of your customer conversations? How are the customers handling that elevated uncertainty?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So is it fair to say that the better performance in Europe like in Q4 is more so Workday execution improving rather than anything really changing in the underlying macro?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. Switching gears, I want to dig into the AI strategy, particularly the agent strategy, and correct me if I'm wrong, but it seems like the dividing line for Workday is there's going to be generative AI that gets baked into the platform. It's going to make all the solutions better. The subscription entitles the customers to that. Feels like where you guys are looking to monetize when you can add sort of automation, you could add agency sort of the solution and start to perhaps displace some labour in that sense that's where you feel you could get the bigger productivity uplift and start charging. So we've seen you guys launched a recruiter agent, really good traction of recruiter agent over the past two quarters. How does the portfolio flesh out over the next 6 months, 12 months? Like what does the agent strategy look like over the next year?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So when we think about the Agent System of Record, you talked about having the security agents. And I think a lot of investors immediately think about sort of identity management companies in the security space, like a CyberArk. You talked about sort of the governance and we think about data governance structures that we get from like Varonis or Microsoft with their purview. Is what Workday brings to the equation like the workflow overlay of that -- you have to work with all of these various systems to sort of onboard the agents? Is it kind of a broader purview that we should be thinking about of what Workday brings to the table?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So we typically think about Workday selling to the Head of HR, selling to the CFO in your core systems. Does this extend to you guys are now going to be selling to the CIO as part of the system of record for agents?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And then if we think about the partnership with Salesforce, when it comes to kind of their agents, is that enabling you guys to have sort of access and sort of have visibility into all three of the pillars that you're talking about in terms of employees, financials and customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 3:45PM, WDAY.OQ - Workday Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. I want to dig in on the agent pricing itself. You guys have talked about with the recruiter agent, you're seeing a 1.5x uplift into your core recruiting customers. Investors are worried about seat-based businesses broadly, workday does a lot of seat-based licenses overall and basically the netting equation of that. Hey, listen, if the recruiter gets much more productive, maybe you need less recruiters. That's less seats. Can we make it up on volume? Can we make it up on consumption? Can you help us unpack that 1.5x uplift? Like what's the equation underneath that, that enables us to get uplift? And does it absorb perhaps some of that seat compression?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it, got it. I want to switch gears a little bit and talk about the core financials opportunity. This has been something that's been a big part of the Workday story for a long time and I think, at times, something that investors got a little impatient for, right? The idea that there's a lot of on premise legacy systems in ERP, that's been the case for a while. It's not just the federal government. Like we see it a lot in terms of larger enterprises as well. And it's been relatively slow going in getting that transformation to take place. We're starting to see some indications that, that's starting to progress faster, that we're starting to see more ERP replacements, that the legacy assets are a drag on the overall productivity of the business. Are you starting to see that on your side of the equation, starting to see some more momentum building in the marketplace to finally sort of get out from under the legacy weight?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. So maybe to wrap up the conversation, we have about a minute left. At the Analyst Day last year, you guys talked about the durability of 15% growth which I think investors would be very happy to see from Workday over the next couple of years. It's probably a little bit above market growth. Can you help us understand what the equation is for that growth? And if we think about what are the core drivers that are going to be durable and enable that from Workday over the next couple of years, what are the key components of that we should be thinking about?

Question: Keith Weiss - Morgan Stanley - Analyst : Amazing. Carl, thank you so much for joining us. Amazing opportunity ahead for Workday. Thank you for coming in and talking to us about it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 3:45PM, WDAY.OQ - Workday Inc at Morgan Stanley Technology, Media & Telecom Conference