Workday Inc at UBS Global TMT Conference (Virtual) Transcript

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

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Yes. Our pleasure. So Chano, maybe I'll start just on a comment broadly about the demand curve over the last 9 months. I think despite ups and downs and what I'm sure are challenges, I think it's important, and maybe you would like to emphasize this, too, that in the end, Workday is likely to post subscription revenue backlog growth not that far off from what you were anticipating prior to COVID. So I must admit, Chano, I was nervous. Some investors were nervous that projects would get deferred. And in the end, you ended up pulling out growth that was actually remarkable given the pandemic. So maybe the opening question is just over the last 9 months, what has surprised you about the resiliency of Workday through the pandemic?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Yes. And Chano, you and Aneel mentioned a couple of calls ago that one shouldn't think of Workday's product set as being quote -- especially HCM, as being back office per se, that you were defining this as employee engagement systems and perhaps post COVID, there is a heightened interest actually in ensuring employee productivity. So do you mind giving us some additional color on that concept, Chano, that perhaps COVID has spurred a greater interest in using modern HCM systems to better engage with customers while we're all working from home? How real is that phenomenon out there?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Okay. Great. That's a good backdrop, Chano. I wouldn't mind just because you reported your results a couple of weeks ago to maybe go back to your October quarter results and maybe offer a little bit more color. So I'd love to ask you 3 or 4 questions about the 3Q results before looking forward. So if you could unpack the drivers of that, I think, roughly 23% subscription backlog growth that Workday reported, it does feel like some deals that got stalled back in Q1 got pushed and closed in 2Q or 3Q. So maybe my first question to you, Chano, is how much of that 23% backlog growth in 3Q might have been some type of catch-up from deals that were pushed in prior quarters? Or maybe there are other key drivers that got you there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2020 / 12:30PM, WDAY.OQ - Workday Inc at UBS Global TMT Conference (Virtual)

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Got it. Chano, one of the other highlights to me in the quarter was your disclosure that the installed base team generated 50% net new ACV growth. I think it was for the fourth quarter in a row. Do you mind unpacking that number a little bit? What drove that? What specific products might have contributed to that number? I know you cautioned us that it will likely slow going forward, but I'd love to focus on the 50% number and what products are getting you there.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Great. Chano, another thing that stood out to me in the quarter was the accounting center impact on the financial side. We've started hearing this from our own customer chats that partners have flagged it as a significant feature improvement that should create a tailwind for Workday going forward. I know you called it out as being a potential contributor to Fifth Third Bank embracing Workday financials. But maybe, Chano, you could put in context how significant it is from the range of interesting feature improvement to something that is actually a real tailwind for next year and the year after. How material is it?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : So Chano, just to put it into perspective, is the notion of accounting center as a means to pull in operational data into the GL, is this something that SAP and Oracle have had for some time that Workday is now sort of catching up to? So it's no longer creating friction in the competitive process? Or is this something that your rivals don't have that takes you a little bit beyond? Can you describe that?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. And maybe, Chano, while we're on the subject of core fin, can you bring everybody up to speed on how that end market feels right now? Obviously, these are still tough times. And I'm sure some CFOs and CIOs are reluctant to make significant changes to their core financials right now, but perhaps others are in a greater need to move forward. So what's the state of the core fin adoption right now, not just for Workday, but broadly across the end market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2020 / 12:30PM, WDAY.OQ - Workday Inc at UBS Global TMT Conference (Virtual)

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Yes. And maybe, Chano, sticking to the financial area. With that as context, maybe you could describe how customer demand to move some of the adjacent (inaudible) how that motion feels different, potentially better than the core fin side does? Maybe an update on the fin plus, if you'd like.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Yes. And Chano, most of the investors listening in terms of category leaders, think of Coupa on the procurement side and perhaps at least among the more modern vendors, Anaplan, on the planning side. Can you talk a little bit about how you're working with your product team to take Workday procurement and Workday planning and make them increasingly competitive against those best-of-breed? Maybe it's feature improvements, maybe it's a sales motion to bring those organizations upmarket into Workday's core HCM base. Maybe describe some of the things you're doing to make yourself more competitive against the Coupa and Anaplans.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Okay. Great. Thank you for that, Chano. That's very helpful. And we were -- we've been talking so far about some of the 3Q drivers. So if you don't mind, let's flip to the forward-looking into the fourth quarter. I know you and Aneel and Robynne talked a little bit about some of the drivers behind the fourth quarter outlook. But that was probably the key issue around the stock after your results. The fourth quarter subscription backlog growth of 14% to 16%, which has decelerated from prior 20-plus percent growth. So Chano, I'd love to ask you, just to unpack that fourth quarter guidance, did anything change? Was it just tough comps? Maybe you could give us the 3 drivers behind that, perhaps conservative outlook, but I'd love to hear from you.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : So Chano, just on that, if you don't mind elaborating, why wouldn't Workday see similar duration benefits that you've seen in the last couple of quarters? What would have changed from 2Q, 3Q to 4Q? Or perhaps you just want to be conservative and not assume that, that benefit would continue. Maybe the distinction between Workday's conservatism around the duration versus maybe something you've seen that's changed?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Okay. Thank you for that, Chano. That's very helpful. And if we stick to the forward outlook, but move beyond the fourth quarter, I know you haven't given any specifics, but maybe the question I'd love to ask you, Chano, is when you and Aneel and the rest of the leadership team and the Board sit down and talk about this post pandemic recovery that you expect. And this has become an interesting part of the Workday story where it's become an interesting potential recovery stock, let's say. But there's ambiguity among investors, Chano, as to what exactly post pandemic means. It's anybody's guess. I certainly don't hold you to having a perfect crystal ball that nobody does. But when Workday talks about post pandemic, what are we roughly talking about? Are we talking about sort of second half fiscal '22? Or realistically, do you mean fiscal '23? Can you try to bracket it for us?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. And Chano, maybe one more question about the demand backdrop, but maybe through the lens of one of your immediate rivals, if you don't mind, one where, if I'm not mistaken, Chano, you worked for 6 years before you came aboard Workday. But SAP dropped a bit of a bomb on Wall Street several weeks ago with a fairly material guide down. And the nature from investors would need to interpret SAP's misfortunes as being illustrative of some broader demand trend. It's tough to figure out whether that's the correct interpretation or whether perhaps it's something SAP specific. I wouldn't normally ask the CEO of one of their rivals to comment on them. But just because they're such a big player in your market, I just REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2020 / 12:30PM, WDAY.OQ - Workday Inc at UBS Global TMT Conference (Virtual) wanted to ask you, Chano, if you could comment on how we should interpret that and whether there's any read through, let's say, to Workday? What are your views?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Great. Maybe, Chano, will move from the demand environment to maybe more internally at Workday around the sales effort, which is obviously near and dear to your heart. Are there any significant internal sales changes going on, obviously, post COVID, you've had to fairly dramatically change the way that you sell to upsell customers? But maybe you could describe how the process of your whole sales team globally

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : And Chano, is there any internal directive from you or any of the other leaders at Workday around the timing of a return to office or a return to a more normal pre-COVID sales motion? What's the internal messaging you're giving your salespeople about when they might "return to normal?"

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Got it. Maybe, Chano, in our last few minutes as we think even further out than next year. So 5 years out. One question I have is, what you would like Workday's product suite to look like. So when you think about the product strategic roadmap, do you envision Workday staying roughly within the HCM, financial, within that sandbox, Chano? Or can you envision a future where you step out of those 2 anchor end markets and create a third and really broaden out the suite? What's your vision around product over the next 5 years?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Well, Chano, that's a good segue to our first question. And maybe it's informed partly by the Salesforce/Slack deal. But the question from one of the audience members is, could you envision an expansion of Workday's product suite into the space of cloud-based team collaboration, digital meetings, brain storming? Can you see Workday getting into the collaboration space, Chano? I suspect this is informed a little bit by the Salesforce/Slack deal. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2020 / 12:30PM, WDAY.OQ - Workday Inc at UBS Global TMT Conference (Virtual)

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Got it. Chano, why don't we end there? I want to express my thanks for participating in this event. I learned a lot. And so thank you to you, Justin and for helping to make the UBS tech conference even more successful. So thank you for your time, Chano.