Workday Inc (WDAY) 2014 Q2 法說會逐字稿

Welcome to Workday's second quarter earnings call.

At this time, all participants are in listen-only mode.

We will conduct a question-and-answer session towards the end of the conference.

With that, I will hand it over to Mike Haase.

Welcome to Workday's second quarter fiscal 2014 earnings conference call.

On the call, we have Aneel Bhusri, our Chairman and co-CEO; and Mark Peek, our CFO.

Following their prepared remarks, we will take questions.

Our Press Release was issued after close of market and is posted on our website, where this call is being simultaneously webcast.

Statements made on this call include forward-looking statements such as those with the words will, believe, expect, anticipate, and similar phrases that denote future expectations or intent regarding our financial results, applications, customer demand, operations and other matters.

These statements are subject to risks, uncertainties and assumptions.

Please refer to the Press Release and Risk Factors in documents filed with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q, for information on risks and uncertainties that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call, we will discuss non-GAAP financial measures.

These non-GAAP financial measures, which are used as measures of Workday's performance, should be considered in addition to, not as a substitute for, or in isolation from, GAAP results.

Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation, and for the fiscal first and second quarters of 2014, also exclude employer payroll taxes on employee stock transactions.

Our non-GAAP measures for the second fiscal quarter of 2014 also exclude non-cash interest expense associated with our convertible notes.

You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings Press Release and on the Investor Relations page of our website.

Also, the Customers page of our website includes a list of selected customers and is updated at the beginning of each month.

Additional customers will be listed on our session guide for Workday Rising at www.WorkdayRising.com.

The webcast replay of this call will be available for the next 45 days on our Company website under the Investor Relations link.

Our third-quarter quiet period begins with the close of business, October 17, 2013.

Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2013.

Finally, our Analyst Day will be held September 10 in San Francisco and will be webcast.

With that, let me hand it over to Aneel.

Thanks, Mike.

In the second quarter, we executed well.

Notably, we crossed the 500 customer mark as we continued to grow our business across North America, Europe and Asia.

We remain extremely focused on maintaining the industry's highest levels of customer success and fostering our unique employee culture of fun and innovation as we expand our workforce around the world.

We believe happy employees equal happy customers, and we are thrilled that in the second quarter, our employees voted us the number one top workplace in the Large Company category in the most recent Bay Area News Group survey.

This is the second time our employees have voted us the number one best place to work during the fiscal year.

In just two weeks from now, more than 3000 attendees will join us in San Francisco for our seventh annual customer conference, Workday Rising.

At Workday, it's our customers that drive much of our innovation, and we're looking forward to learning from them and celebrating with them in the weeks ahead.

Development for Big Data Analytics and Recruiting is on track, and Big Fin, our focus on bringing financial management applications to the global force in 2000, continues to progress as planned.

We will share updates on this initiative at Rising along with results of our annual customer satisfaction survey.

I look forward to seeing many of you at our first Analyst Day in just a few weeks.

For now, I will turn it over to Mark for a look at our performance.

Thanks, Aneel and good afternoon, everyone.

I want to thank you for joining us this afternoon as we close out a very successful first half of fiscal 2014.

We are very pleased not only with the financial results for the quarter, but also with the progress we have made in our product and market expansion.

In the second quarter, we generated record quarterly revenues and billings, continued to make progress towards profitability, and strengthened our balance sheet with our convertible notes offerings.

Operationally, we continue to execute well as we expand our footprint globally, and have made significant investments in our data centers, new product initiatives and expansion of our office facilities to accommodate our growth.

We're able to fund these investments because our business model continues to prove itself from a cash flow perspective, and we continue to make progress on our non-GAAP operating margins, although this is clearly a secondary objective to growth and new customer acquisition.

Fundamental to our business model is the belief that once we win a customer, we keep a customer for years beyond the initial subscription period.

This is driven by a combination of the importance of the applications to our customers' business, our frequent updates with meaningful features, functionality and improved ease-of-use, and of course, very high customer satisfaction.

Our balance sheet remain strong, with nearly $1.3 billion of cash and marketable securities, and $326 million unearned revenue.

We raised $533 million in cash from our convertible notes offering net of issuance cost and the cost on related bond hedge and warrant transactions.

We are pleased with our accomplishments in the first half of the year, and want to thank our employees, our partners and our customers.

Now, I'll walk you through the financial details of our second quarter.

Total revenues for the second quarter were $107.6 million, an increase of 72% from a year ago.

The vast majority of our sales are currently in US dollars, so the impact of exchange rates is minimal.

Subscription revenues for our cloud applications were $81.1 million, up 92% from last year.

As discretion revenues are recognize ratably, our revenue growth represents the services we have provided to our more than 500 customers.

The weighted average duration of new contracts signed in our second quarter was approximately 3.5 years, an increase from the prior two quarters and driven by a couple of large deals with five-year terms.

As a reminder, we focus our selling efforts on, and have a preference for, three-year terms on contracts.

We believe we will have very high renewal rates and that the economics of shorter-term contracts are better for us in the long run.

Our professional services revenue was $26.4 million, an increase of 29% compared to last year.

Our primary objective with our services business is to maximize customer satisfaction and is therefore not a primary revenue growth driver.

As a reminder, Workday strategy is to rely on systems integrator partners for the bulk of our customer deployment, and we continue to be pleased with the adoption from our partner led deployments.

Total unearned revenue at quarter end was $326 million, up 8% sequentially, and 32% from a year ago.

Over 90% of our unearned revenue is from subscription fees.

Short-term unearned revenue was $247 million, an increase of 10% sequentially, and 63% from last year.

Long-term unearned revenue was $78 million, up 2% sequentially and down 18% from last year.

As we have discussed in the past, as our balance sheet strengthens during fiscal 2013, we change changed our sales compensation structure to deemphasize multiple year up-front cash collection to finance the Business.

So, the percentage of the contract build up front is less than in comparable periods from a year ago.

This change negatively impacts the year-over-year comparisons to our unearned revenue, calculated Billings and cash flows throughout the term of the initial customer arrangement, but we believe it improves the long-term economics of our business.

Looking ahead to the third quarter, and our fiscal 2014, we are mindful about the challenging macroeconomic environment and the muted expectations for IT spending, particularly when you consider that unlike much of the IT industry, we do not have a US federal customer base to level out Q3.

However, the strength of our business model and continued momentum provide very good revenue visibility, and we expect a solid third-quarter.

Total revenue for the third quarter are expected to be within a range of $115 million to $118 million for growth of 58% to 62% as compared to the prior year.

Subscription revenue is anticipated to be within a range of $88 million to $91 million, reflecting year-over-year growth of 71% to 76%.

Last quarter, we provided color regarding our expectation of sequential calculated Billings increases in Q3 and Q4.

Given the strength of our Q2 billings, we anticipate Q3 will be flat to Q2, and expect a strong, seasonal increase in Q4.

We anticipate total fiscal 2014 revenues of approximately $436 million to $446 million, or growth of approximately 59% to 63%.

Subscription revenue is anticipated to be within a range of $337 million to $343 million, reflecting year-over-year growth of 77% to 80%.

Guidance assumes Professional Services revenue to decrease seasonally in Q4 from Q3, as a result of the year-end holidays.

Let's spend a few minutes on operating expenses and our Results of Operations.

Unless otherwise noted, all references to our expenses and operating results are on a non-GAAP basis, which are reconciled in the Press Release tables and posted on our IR website.

Our total headcount was 2120 people as of the end of our fiscal second quarter, and included significant hiring across our international market.

For the current fiscal year, we continue to anticipate adding more people than we did last year, as we build out our global market expansion efforts and product development teams.

Approximately two thirds of our total expenses are employee related.

As you consider our operating expenses in the second half of the year, it's important to know that we are ramping hiring across geographies.

In fact, during the first week of the third quarter, we welcomed over 70 new employees to the Workday family, our largest weekly starting class ever.

Our second quarter gross margin was 63.3%, up 219 basis points from the first quarter, driven largely by our subscription revenues growing faster than Professional Services as well as higher subscription gross margin.

Although we expect the subscription mix will continue to increase as a percentage of total revenue, we anticipate our gross margin to potentially fluctuate from quarter to quarter as we invest in programs to ensure ongoing customer success post deployment and to support implementation of new products as they are brought to market.

The second quarter Subscription gross margin was 80.4%, and includes the cost related to providing our cloud applications, compensation and related expenses for operations staff and data center networking and depreciation.

The Subscription gross margin improved 179 basis points sequentially, due largely to increased volumes and scale efficiencies.

Our second-quarter operating loss was $21.7 million or a negative 20%.

This was significantly better than we had anticipated and largely the result of the operating leverage received on increased revenue and pace of new hire starts coming later in the quarter and spilling over to the beginning of Q3.

Although long-term profitability and cash flow generation are important goals, we believe our focus today needs to be on market expansion, continued product innovation and growth.

Product development expense in the second quarter was $37.4 million, up 9% sequentially and up 63% from a year ago.

We continue to invest in our product development for new solutions such as recruiting and Big Data Analytics as well as strengthening and extending our suite of HR, Payroll and in particular Financial Management applications.

Our HR and Financial Management applications, our enterprise systems of record, at the core of our customers business.

We are building solutions for large, complex global enterprises, and we believe continued investment in our applications will be a key driver for the future growth.

Sales & Marketing expense was $42.1 million, up 13% sequentially, and up 44% from last year.

The majority of our sales capacity added during the quarter was in our international markets.

We plan to make significant additional investments over the next several years to leverage our global market expansion.

General and administrative expense was $10.3 million, up 12% sequentially and up 54% year over year.

The net loss per share was $0.13 on 173 million weighted average shares.

Given our net loss, all outstanding stock options, warrants and common stock equivalents are anti-dilutive and not included in the loss per share calculation.

Taking into account our adjustments to GAAP operating income that Mike referenced at the start of the call, we currently expect our fiscal third-quarter, non-GAAP operating margin to be within a range of a negative 23% to negative 27% of total revenue and for the year, to be approximately negative 22% to negative 26%.

The GAAP operating margin for the fiscal third-quarter is expected to be 16 to 18 percentage points lower than the non-GAAP margin, and the full year 2014 GAAP operating margin is expected to be approximately 13 to 15 percentage points lower than the non-GAAP operating margin.

Now, onto our balance sheet and statement of cash flows.

Cash and short-term investments at quarter end were approximately $1.3 billion, up $489 million sequentially driven largely by net proceeds of $533 million from our convertible debt offering and associated bond hedge and warrant transactions.

During the quarter, we issued two series of convertible notes, one for $350 million at a coupon of 75 basis points that matures in July 2018 and the other for $250 million, at a coupon of 150 basis points that matures in July of 2020.

We also entered into a related bonds hedge and warrant transactions that effectively provide dilution protection until our share price reaches approximately $108.

If this occurs, we estimate our share count would increase by approximately 7.3 million shares.

Other expenses increased in the quarter primarily as a result of interest expense associated with our convertible notes offering issued in June.

For your modeling, our quarterly, non-GAAP interest expense from the converts will be approximately $1.6 million.

From a GAAP perspective, the quarterly interest expense, including approximately $5.8 million of non-cash amortizations reflecting the discount and issuance cost, is $7.4 million.

Operating cash flows were negative $12.9 million for the second quarter, and a positive $1 million for the trailing 12 months.

As mentioned last quarter, our first quarter cash flows benefited from nearly $17 million of taxes and other remittances payable, related to stock option exercises in April.

These items reversed in our second quarter, and were a negative to Q2 cash flows.

Adjusting for this, second quarter operating cash flows were approximately $4 million, with no impact on the trailing 12 months.

Free cash flows for the second quarter were negative $42.6 million and for the trailing 12 months, and negative $55.2 million.

Capital expenditures for the quarter increased significantly as we build out our data centers and expand our office space.

Adjusting for the reversal of first quarter taxes with stock option exercises, second quarter free cash flows would have been approximately a negative $26 million for the quarter.

We think looking at cash flows on a trailing 12 month basis is a better indicator of progress than Quarterly Results, as cash flows can be volatile quarter to quarter.

As a reminder, when calculating free cash flows, we conservatively subtract the gross value of all equipment, even when acquired under capital leases, so we can evaluate our progress on free cash flows independent of our capital financing decisions.

We anticipate total CapEx of approximately $80 million for fiscal 2014.

To summarize, we are very pleased with our solid second quarter.

Looking ahead, we are investing for the long term and see a very large opportunity in front of us.

You should expect us to continue making significant investments in our product development and global market expansion to maximize our long-term growth opportunities.

Thank you, and we look forward to seeing many of you on September 10 at our Analyst Day in San Francisco.

With that, let's begin the Q&A process.

(Operator Instructions)

John DiFucci, JPMorgan.

You have a lot of development projects going on right now, Big Data, international Payroll, recruiting, but you just raised over $500 million with the converts.

What areas should we be thinking about that are areas that you would consider acquiring technology?

I mean, you've only done one, I think in your history with Cape Clear, what other areas might you consider acquiring?

Versus developing in-house?

John, thanks for the question.

Acquisitions are not a huge part of our strategy, and I think the Cape Clear acquisition is illustrative of the kind of acquisitions we do really around core technologies that were things that we were not building at Workday, and there is a couple around visualization as an example or technology and Analytics type that could be of interest, but there's nothing immediate on the radar.

Okay, great.

Thanks Aneel, and Mark, a follow-up, I just want to clarify something, I think you said Q3 billings would be flat to Q2?

I just want to -- was that total billings?

Because if I look over the last couple of years, we've actually seen a decline in total billings or, when I look at revenue plus change in total deferred, or, was that -- when I look at change in current deferred because you had some -- you've been billing just annually more recently, that has been flat quarter to quarter to quarter the last couple of years?

Yes, the color we gave, John, is for total billings, and part of that is as we have moved more towards just collecting one year of ACV on a new contracts, things are beginning to flatten out over time, and so just as we looked at the seasonality versus last year, we think it's going to be approximately flat to the second quarter

Okay, great.

Thanks a lot, guys, nice job.

Heather Bellini, Goldman Sachs.

Great, thank you.

I just had two question, guys.

First, you mentioned the five-year deal that you signed, did some of those pay more than one year up front?

Because it seems like the outperformance on deferred versus the Street was more in long-term versus short-term.

And then, the second question is, can you give us an update, Aneel, on the top two add-on products in the quarter?

And, who you think you're displacing with those wins?

Thank you

Heather, on the billings, we had one five-year deal that was eight figures, and they did paid three years as the initial ACV, which impacted the long-term unearned revenue.

In terms of add-on products, we don't typically disclose any rank order.

I do know we had a good quarter in terms of Payroll both as part of core HR as well as add-ons.

At the Rising Analyst Day, we are going to get into a lot more detail about the new product initiatives and where you might see attachments going forward.

And the new product initiatives are right on track, and we're very pleased with where they are today.

Competitively, it's the same people, it's -- we're replacing Oracle, SAP, primarily on HR side.

Some -- handful of wins against Ultimate, which are replacements as well.

I think the only new one I would highlight is that as we're getting traction in financials and as we know the product is moving upmarket, in the midmarket arena, we're beginning to replace Microsoft Dynamics within all the different flavors.

Great, thank you.

Jennifer Lowe, Morgan Stanley

Great, thank you.

Aneel, maybe this one is for you.

As you look at Oracle and SAP, they both had some challenges in Q2, and obviously you all had another strong result.

As you look out in the marketplace, are there signs of delayed decisions or anything like that, that you're seeing across the board that might explain some of the weakness that you've seen in some of the competitors?

Or, do you feel like you're starting to see more competitive momentum versus those traditional leaders now that you've been in the market a little bit longer and you start having more referenced customers, those types of things?

I think this is all tied to the massive secular shift we're going through, the shift from client/server to the cloud, and what we see are big upgrade of legacy systems being delayed as customers evaluate the different cloud offerings, so I really think that it's more secular shift than anything else.

Great.

And then, just a quick one for Mark.

I think at the time of the IPO, what you all had talked about was sort of five-year target of profitability on margins I think of 10% type margins in that timeframe, and clearly you're tracking ahead of that or, targeting ahead of the guidance for this year.

But, on the other hand, now you have all this additional capital that you've raised with the converts, which in theory should help extend that timeline in terms of starting to see more material cash flow profitability.

So, has there been any change in thinking on the timeline given that you're sort of pacing ahead of expectations right now counterbalanced with the additional financial flexibility from the convert?

We haven't made a significant shift in how we're thinking about how we reach profitability.

I point out that this quarter, the 20% negative margin result frankly was a little bit disappointing because it came partly as a result that we didn't hire up to where we had planned to hire, and we think we're making progress and that we should catch up on that by the end of the year.

And hence the guidance of operating margins being down sequentially in the third quarter.

But right now, our focus is completely on growth.

It's on getting net new customer, it's on market expansion, and it's on continued product development.

Great.

Thank you

Walter Pritchard, Citigroup.

Thanks, this is Robert Chen in for Walter.

A question about the economics of the net enterprise is retracting job postings, we've noticed that a lot of your investments are going into that band of customers, and I think you hinted earlier that maybe you're seeing better cross-sell with the financial product and that customer segment.

Could you talk a little bit about the economics of that segment and the justification of that investment there?

Yes, so historically, we had had a field organization that really could really hunt whatever deals that they wanted to hunt, and we've got into a pattern of probably being too tied to the very large deals.

And we also noticed that in the 1000 to 3000 category we were doing well, but we didn't have a focused sales effort there.

We thought that was a prefold market to pursue as well, that is how frankly end up replacing Ultimate quite often or beating Ultimate, that is where they typically sell to.

So, we set up a dedicated sales organization I think a year and a half ago just to sell to the midmarket.

We are pioneering the new implementation methodology there to speed up the implementation and reduce the cost of implementations, those are going quite well, and I would suspect that over time, those methodologies drift their way up into the large marketplace as well since those customers also want to see faster and cheaper implementations.

In that midmarket, the financials products are very much ready for prime time, and yet we're seen the sale of the entire platform.

I would say just as something of note for that market, if they can buy a full platform for one, they will; they tend to choose platforms rather than having to piece together best of breed solutions, so we've seen that pattern in that market, again that's one of the reasons why we're beginning to get some Microsoft dynamics replacement as well on the financial side.

Got it, and question for Mark, I think last quarter you talked about some total billings guidance for the full year of not being a over $530 million just wondering if you have any sort of update to that?

In light of the most recent quarter?

Although we didn't update the total of $530 million, I think it is safe given the performance in Q2 and that we expect flat in Q3 we'll be up probably around $530 million, or slightly ahead of it for the full year.

Great, thanks.

Peter Goldmacher, Cowen & Company.

Hi, guys, this is Joe for Peter.

So I noticed that you are doing investments mostly in Internet, well a lot of international, and so given that Europe has been SAP success factors, homebase, Asia's recently been weak, how do you guys see the opportunity internationally over the near-term, and what do you think of it in the future?

Is -- are you going to be primarily addressing US-based multinationals, or are you addressing foreign multinationals as well?

Thanks a lot.

We are already addressing [foreign] multinationals.

We have a strong sales organization in Europe, and we're building a strong sales organization in Asia, and those sales organizations are very focused on the multinational companies based in those regions.

Now, I think it just like the US and the rest of North America, Europe and Asia are going through the same secular trend, the shift from client/server to the cloud, probably two or three years behind in Europe, and Asia it's happening I think right as it happens in the US in some cases in some markets in Asia, they're just skipping the last generation of technology going straight to the cloud.

So we're very bullish on both of those markets.

Having said that, I do think that we see from time to time a deal get pushed or get adjusted because of the economic uncertainties in particular in Europe.

So those are economic cycles that come and go; in general we see the same great market opportunities overseas as we do in North America.

We probably see -- I don't think we see SAP more in Europe, I think we see them a lot in the US and we see them a lot in Europe.

I think we see Oracle less in Europe, we see Oracle more in the US.

Thank you very much.

Jason Maynard, Wells Fargo.

A good afternoon, guys, I had two questions for you.

First off, I don't believe you gave the customer count financials, but any color you can provide us on what you saw during the quarter in terms of uptake around the financial applications?

And the second question, Aneel, maybe talk a little bit about what you're seeing in terms of bottlenecks to growth on the distribution side or things like that?

Where do you feel you're at with your Partners in terms of getting them ramped to provide obviously fulfillment capacity on implementations?

Thanks.

So, on financials, we don't update the customer count every quarter, we tend to do it around milestones.

I would say we had a good quarter, and everything is trending well on the financial products themselves and the sales organization.

I'm going to give a more detailed overview about what's happening with the financial products, the ecosystem, the sales organization, at the Analyst Day, so I don't want to steal my own thunder.

So just stay tuned for that piece.

In terms of the gating items for growth, Mark covered one of those, is continually finding the best and brightest people, and we are a little bit behind on hiring.

I think we've done a good job on sales hiring, we're now into the areas where we're hiring people that are not necessarily ERP veterans but people from other technology companies, and we're doing a lot of the training ourselves.

On the ecosystem side, it's been nice over the last 12 months to see the investments coming in from Accenture and Deloitte, Deloitte been there from the early days, but Accenture's really stepped up, so has IBM, so has PWC, and [Towers Watson] continues to be a big investor.

We've always had a great stable of boutiques, but now the big firms are beginning to invest pretty heavily in ecosystem.

It's still a matter of keeping up with the customer growth on that ecosystem side, and so that something we monitor very carefully, and we know we need to still see pretty significant growth, not just the end of this year, but well into next year as well.

Thanks and one follow-up on that front.

What types of things are you doing differently in terms of your international system integrated relationships?

Is there anything that you're finding that you need to do different in Europe or in Asia Pacific versus the US?

Well, in some ways, it happens in reverse order in Europe where in the US, we started with a set of boutique Partners, the big SI's were not ready to engage with Workday, the big SI's came later.

As we move into Europe, we have the big SI Partners in the US, and they quickly jumped into investing in Europe, so we have a strong stable of Accentures and Deloittes and IBM's and PWCs working with us across the globe.

We are also in the process of building out that boutique set of Partners in Europe, and I think that's not necessarily different, just that we have the big SI 's going to Europe in a different way than we had them in the early days in the US.

Great.

Thank you very much.

Brendan Barnicle, Pacific Crest Securities.

Thanks so much, Aneel you guys have made great progress on the HR side and the financial side.

As you look a bit longer term, where do you think you may go next?

Is it more vertical specific?

Are there some other adjacencies that make some sense?

I'm going to spend a little more time talking about this topic at our Analyst Day.

The natural next place is to first take our existing HR and financial products, in particular, our financial products, and begin to add industry features to them.

So, the first place we've done that has been in education and government market, and I would expect that the next wave of functionality once we build out the core for financials and we've proven the scale and those projects are tracking nicely, and actually in the not-too-distant future behind us, we'll look at industry-specific areas like billing, like Professional Services automation, the unique features for financial services and our continued investment in education and government.

And beyond that longer-term, we could start to look at industry applications that go beyond HR and financials.

For the time being though, we're very focused on HR financials and now Big data marketplace, I think that's going to carry us for at least the next three or four years before we would entertain anything that was industry-specific from a new application perspective, but we'll start layering in industry features and you might see us add to the breadth of our Analytics products as well.

Great, that's really helpful, and Mark, on free cash flow, obviously it has been well above expectations last couple quarters, you noted it was mostly driven by the tax benefit, but is there anything you see on the collection site or other places that surprised you on the cash flow side?

Not in particular.

We had some lumpiness between the first and the second quarter as a result of the expiration of the lockup, and we talked about that last quarter, Q1 benefited by $17 million and Q2, the balanced itself out.

But no real surprises, we're beginning to level out on the fact that we're billing and collecting one year of ACV from quarter to quarter, like this quarter it may go up a little bit because of one particular transaction, but for the most part, it's balancing it's about, DSO's staying relatively flat, our collection history is good and it's going about as expected

Great, thanks a lot.

Pat Walravens, JMP Group.

Great, thank you.

Aneel, on Oracle's earnings call last quarter, they made a comment about not only are we bigger than Workday and HCM, but we are growing faster than Workday.

I was wondering if you could share your perspective on that?

It's hard to know because they don't disclose there independent numbers on HR.

All I can look at are win rates, and our win rates are very positive against the legacy competitors including Oracle

And maybe following up on that, could you address the Partnership that they announced, with Salesforce and NetSuite which seem to be motivated by you guys?

I'm not sure what they're motivated by so I won't try to guess at that, the NetSuite one doesn't really impact us, the SAP market has never been a focal point for us and we still, as we continue to move upmarket in the financial world, we still rarely see NetSuite, so I don't think that impacts us.

With the Salesforce one, I think you should talk to Mark, all I would say is our partnership remains intact, our friendship remains intact, and our field organizations continue to work well together.

We all have to work with lots of different vendors in the marketplace, but our relationship with Salesforce to me is not really any different than it was one or two or three quarters ago.

Thank you.

Time will tell how all these relationships pan out, but I would hope that we stay close Partners with Salesforce and our other close Partners.

Thank you.

Brent Thill, UBS.

Thanks.

Aneel, and the past you've mentioned some flavors of the wins during the quarter in terms of the customer names and the sizes of kind of where they're headed, can you give us any color?

Or, is that you're saving that for the conference?

No we're going to save that for the conference, but I would also say that as the number of customers continues to grow, it's a lot of effort every quarter to get the customers to give us the authorization to use their name in the Press Release, and I frankly think the point early on was to show the brand names we're getting.

And we've got so many great brand names.

We'll disclose customers from time to time, but I'm not sure we're going to do it on a quarterly basis going forward the way we have, and I will focus on showing some new names at the analyst meeting in a couple of weeks.

Okay, totally understand.

Just on hiring you mentioned you're behind, is there a reason why you're lagging?

Or, when you look at the second half, you're obviously expecting that to ramp to get above the [$680 million] you added last year?

I think, Brent, it's a combination of things.

One is that we are adding more people again this year than we added in total a year ago, and so we're just beginning to feel some of the strains of scale in those processes, and we're investing in recruiting organizations and our own internal processes about how to higher to larger groups of people.

As that said, we're behind our hiring plan, that is not at a level where it's causing us to lose focus or to miss any of the key deliverables we have either from a product perspective or with customers, and it was great to see the first Monday of August, we had our largest hiring class ever.

I think it's something that will get back on track, just form a pacing perspective and we are looking at our plans as we started the year, we're a bit behind.

Great, thanks.

Operator, we're going to take two more questions, please.

Steve Koenig, Wedbush.

Hi, thanks for taking my question.

Maybe just two questions that expand on earlier ones.

The easy question is do you all have handy the international versus US revenue split?

Just wondering what that is?

The revenue percentages, domestic was 85% during the quarter and international was 15%

Great, thank you.

And then, just for the follow-up, you talked a little bit about bringing the Partners, growing those Partners and importance of the ecosystem.

I'm wondering, as a result of talking with integrators and finding out how backlogged they are, and how much demand there is and the lack of trained partner personnel in the ecosystem, how long do you think it will take to get that, get them ramped to the point where deals may be aren't waiting much longer than you'd like because of the lack of trained consultants?

How long does that last before you kind of the supply and demand balance is better?

I hope integrators are constantly trying to keep up with our sales momentum so, I don't see that changing anytime in the near future.

I'm not sure if slowing up as much, but what we have tended to do at Workday is if we sense a gap in the ecosystem, whether it's a quarter out or two quarters out, we will hire ourselves, and that's why the Professional Services number can bump up and down a bit.

We're very focused on customer success, and if there's not the resources required, we'll fill the gap, and in particular in new products like financials, we tend to take more of the onus of that work ourselves just to make sure there's customer satisfaction with those first wave of customers.

Great, thanks a lot, that does it for me.

Brad Reback, Stifel Financial.

Hey guys, how are you?

Just real quick on the eight figure deal that you alluded to, was that just HR or was that the entire suite, HR and financials?

It was purely an HDM deal

Great, thanks a lot.

Great, that concludes the call, we'll talk to you at the Analyst Day in a few weeks.

We thank you for your participation in today's earnings call, you may now disconnect and have a great day.