Views on the HR News: Workday’s Q1 Earnings Release

Last week, Workday held its earnings call for Q1 FY2024. Don’t worry if you weren’t able to tune in live, today’s blog recaps everything you need to know about the software giant’s recent performance. Keep reading to get all the highlights from last week’s call, and learn what our team of experts attributes as the source of the company’s impressive results. 

Off to a Powerful Start

While multiple ERPs announced strong Q1 performance for FY2024, Workday stood out amongst the crowd when its recent earnings call shot up its stock prices. We think Co-CEO Carl Eschenbach recapped Workday’s performance best, declaring on the earnings call:

“We’re off to a great start in FY ’24 with strong new business bookings, healthy pipelines, and continued progress towards our strategic growth initiatives, and while the macro remains uncertain, we are positioning the business to return to 20%-plus subscription revenue growth when the environment improves.”

Skillcentrix’s co-CEO, Matt Gregory agrees. Post-earnings, he shared, “It’s an exciting time to be a part of the Workday world. Their continued success is no surprise. With last year’s introduction of new co-CEO, Carl Eschenbach, Workday has been signaling how they plan to leverage their position as a core Enterprise platform supporting the enterprise’s most critical assets: Their people and their money. We’re also seeing a strong push to expand its impact and value into the massive customer base and drive its AI and ML tools into the platform — which will only bolster customers’ perception of Workday’s capabilities and value. The increased appeal of “best of suite” options in the current spending cycle should also continue to drive FY24 success.” 

Workdayday’s Q1 FY2024 Recap

It’s safe to say that Workday had a note-worthy first quarter, beating its estimates on both the top and bottom lines. Of course, it wouldn’t be an earning’s call recap without getting into the nitty gritty numbers, so without further adieu, let’s dive right in. Here are the key stats to know about Workday’s performance for Q1 FY2024: 

• Workday increased its total revenues by 17.4% from Q1 FY2023, totaling $1.68B
• Workday’s total subscription revenue backlog of $16.65B is up 31.6% YoY. 
• Workday raked in $1.53B in subscription revenues, boasting a 20.1% increase from last year 
• Workday’s operating loss shrunk from $72.8M (-5.1% of revenues) in Q1 FY2023 to $19.8M (-1.2% of revenues) in Q1 FY2024.

Workday’s FY2023 At a Glance

Workday’s impressive performance extended well beyond just this last quarter. Their latest earning call also recapped overall performance for FY2023. Here are the highlights: 

• Workday’s total revenues for FY2023 increased 21% YoY, reaching $6.22B
• Their subscription revenues totaled $5.57B, growing 22.5% since FY2022
• Their operating cash flows of $1.66B are up 0.4% YoY

While all of these stats were impressive, Workday’s closely watched 24-month subscription revenue backlog has become one of the most cited stats from the call. It went up 22.9% (ahead of guidance for a 20% gain) to hit $9.79B. Meanwhile, Workday’s Non-GAAP operating margin was 23.5%, two percentage points better than the company’s forecast of 21.5%. 

Workday Exceeds Expectations, Raises Subscription Revenue Goal

Performance has been so strong for the company that Workday CFO, Barbara Larson, used the earnings call to announce a change in Workday’s 2024 financial plans. Workday has now raised its guidance for subscription revenue to the $6.55B-$6.75B range, representing 18% growth, in response to its Q4 performance. Here’s what Larson had to say about the change: 

“We are maintaining the midpoint of our preliminary fiscal year 2024 subscription revenue guidance while increasing our fiscal 2024 non-GAAP operating margin outlook to the high end. We now expect subscription revenue of $6.525 billion to $6.575 billion, growth of 17% to 18%, and a non-GAAP operating margin of 23.0%, which includes a 150 basis point increase resulting from a change in our useful life policy for servers and network equipment. Our outlook reflects our strong fourth quarter execution and the scale of our model, balanced with our expectation that the environment will remain uncertain in the near term.” – Barbara Larson, CFO, Workday 

Machine Learning Gets a Shoutout 

Eschenbach’s counterpart and co-CEO at Workday, Aneel Bhushri, also used the call last week as an opportunity to highlight Workday’s success with artificial intelligence and machine learning, sharing: “Despite the unpredictable environment, we remain well-positioned to drive the future of work for our more than 10,000 customers thanks to our amazing employees and unique approach to embedding artificial intelligence and machine learning into the very core of our platform.”

Workday isn’t new to AI and Machine Learning capabilities, as they’ve been working in these areas for almost a decade. This commitment has led to the infusion of AI and ML across their entire product portfolio, and the results are promising. According to Skillcentrix HR expert, Laura Hume, “building machine learning into their solutions provides better automation and enhanced insights about each company’s workforce.” 

We’d be remiss not to mention the role Workday’s data model plays in its AI and ML strategy. 

Skillcentrix CSO, Brett Schaedler, shared: “Workday is gaining momentum in this space for many reasons but their AI & ML strategy and philosophy are differentiating themselves. Since they have embedded into their foundation across both HCM and Financials with a unified data model, this provides them with unprecedented data across all of their 10k plus customers. No other ERP has built this from the ground up and many competitors are now trying to catch up.”  

Changes to the C-Suite: Introducing Workday’s New CFO 

In addition to sharing its stellar performance, Workday used last week’s earnings call to announce that Barbara Larson, CFO, is stepping down to spend more time with her family. Zane Rowe, currently CFO at VMware, will step in as CFO of Workday starting on June 12th. His past experiences include leading North America Sales for Apple and serving as CFO at United Airlines. 

Workday co-CEO Carl Eschenbach welcomed Rowe to the team, sharing “Zane’s experience with scaling high-growth organizations, coupled with his deep financial expertise, make him the perfect leader to support Workday’s continued momentum as more and more organizations turn to us to help them navigate the changing world of work.” 

So Why is Workday Beating Estimates?

We asked our team of HR veterans why Workday is excelling against predictions from financial advisors. Here’s what they had to say: 

• Workday has had tremendous success due to the organization’s diligent strategy. The firm is also experiencing success due to the environmental conditions as businesses try to climb out from Covid and shift their talent strategy. Teams need tools to help them with that – and Workday provides just the right offerings to meet their needs.
  
  They’re also doing a bang-up job providing end-to-end functionality to provide teams with the ability to track talent across the employee lifecycle. Those capabilities, coupled with their cloud-first strategy are a recipe for success. – Laura Hume, Skillcentrix

• Workday is beating estimates because they truly collaborate with customers and have a clear vision for improving the employee experience. They’ve also created a strong partner ecosystem that rewards partner loyalty with powerful acceleration opportunities.  -Ken Joel, Skillcentrix

What’s to Come 

Speaking to the rest of 2023 and beyond, co-CEO at Workday, Carl Eschenbach stated, “We are doubling down in strategic growth areas by investing in our customer base, focusing on key industries, evolving and investing in our partner ecosystem, and relentlessly focusing on innovation.”

We at Skillcentrix will be eagerly watching along, and can’t wait to see what further developments Workday makes for the rest of this year and beyond. 

Editors Note: Image credit, Barron’s