WDAY Q3 2022 Earnings

Call Details

• Call Title: Workday, Inc. Q3 2022 Earnings Call
• Date: November 18, 2021 at 9:30 PM UTC
• Management Team:
  • Aneel Bhusri (Co-CEO)
  • Chano Fernandez (Co-CEO)
  • Robynne Sisco (President and CFO)
  • Pete Schlampp (Chief Strategy Officer)
  • Justin Furby (Vice President of Investor Relations)
  • Doug Robinson (Co-President (promoted from UBP of Global Sales))
  • Barbara Larson (Chief Financial Officer (effective Feb 1))
  • Cheyenne Chakraborty (EVP of Product and Technology)

Call Summary

Financial Performance

• Subscription revenue in Q3 was $1.17B, up 21% year-over-year.
• Professional services revenue in Q3 was $156M, resulting in total revenue of $1.33B for the quarter.
• Revenue outside the U.S. was $336M, up 23% year-over-year, and represented 25% of total revenue.
• 24-month backlog at the end of Q3 was $7.12B, up 20% year-over-year.
• Total subscription revenue backlog was $10.97B, up 24% year-over-year.
• Non-GAAP operating income for Q3 was $332M, resulting in a non-GAAP operating margin of 25% for the quarter.
• Operating cash flow in Q3 was $385M, up 31% year-over-year, driven by margin strength and strong collections.
• Headcount increased by approximately 800 net employees in Q3, bringing total employee count to over 14,200.

Guidance

• FY22 subscription revenue guidance was raised to a range of $4.533B to $4.535B, representing approximately 20% growth.
• Q4 FY22 subscription revenue is expected to be $1.216B to $1.218B, representing approximately 21% growth.
• FY22 professional services revenue is expected to be $590M with $145M expected in Q4.
• Based on Q3 outperformance, FY22 non-GAAP operating margin is expected to be 22%, and Q4 non-GAAP operating margin is expected to be 16%.
• GAAP operating margin is expected to be approximately 24 percentage points lower than non-GAAP for both Q4 and the full year.
• FY22 operating cash flow guidance was updated to $1.65B, representing approximately 30% growth year-over-year.
• FY22 other capital investments are expected to be $270M to support customer growth.
• A preliminary view for FY23 includes subscription revenue of approximately $5.44B, or 20% growth year-over-year.
• FY23 non-GAAP operating margins are expected to be 18% as the company increases top-line focused investments, with an expectation to resume margin expansion after FY23 toward 25% at $10B revenue.