WDAY Q2 2023 Earnings

Call Details

• Call Title: Workday, Inc. Q2 2023 Earnings Call
• Date: August 25, 2022 at 8:30 PM UTC
• Management Team:
  • Justin Furby (Vice President of Investor Relations)
  • Aneel Bhusri (Co-CEO)
  • Chano Fernandez (Co-CEO)
  • Barbara Larson (Chief Financial Officer)
  • Pete Schlampp (Chief Strategy Officer)

Call Summary

Financial Performance

• Workday reported Q2 subscription revenue of $1.37B, up 23% year-over-year.
• Professional services revenue in Q2 was $168M, up 15% year-over-year.
• Total revenue outside of the U.S. was $383M, representing 25% of total revenue.
• 24-month backlog at the end of Q2 was $8.37B, up 22% year-over-year.
• Total subscription revenue backlog at the end of Q2 was $13.47B, up 27% year-over-year.
• Non-GAAP operating income for Q2 was $302M, resulting in a non-GAAP operating margin of 19.6%.
• Q2 operating cash flow was $114M, with roughly $40M of collections shifted from Q2 into early Q3 due to quarter-end timing.

Guidance

• Workday maintained FY23 subscription revenue guidance of $5.537B to $5.557B, representing 22% year-over-year growth.
• Workday expects Q3 subscription revenue of $1.418B to $1.420B, representing 21% year-over-year growth.
• Workday continues to expect FY23 professional services revenue of $650M and Q3 professional services revenue of $164M.
• Workday expects 24-month backlog to grow approximately 19% year-over-year in Q3.
• Workday now expects FY23 non-GAAP operating margin of 19% and expects Q3 non-GAAP operating margin of 18%.
• Workday stated GAAP margins are expected to be approximately 22 and 23 percentage points lower than non-GAAP margins for Q3 and FY23, respectively.
• Workday raised FY23 operating cash flow guidance to $1.64B and now expects capital expenditures of $450M for the year.
• Workday plans to repay the $1.15B convertible debt principal in cash during Q3, which will reduce non-GAAP diluted share count by roughly 8M shares.
• Workday reiterated an FY23 non-GAAP tax rate of 19%.