Workday (WDAY) Q1 2017 Earnings Call

Workday (WDAY) CEO Aneel Bhusri said the senior leadership team has a plan to get to profitability

“I wanted to address the topic of profitability as many of you know profitability has been a core value of the company since Dave and I started Workday back in 2005. For the past several years we have been primarily focused on growth but have always kept our eye on our path to profitability.  To that end, the senior management team spent a few days offsite earlier in the quarter planning our path towards profitability over the next few years both from an operating margin and cash flow generation perspective. We came out of that session with a clear strategy that has since been shared with the whole company.”

Workday (WDAY) CEO Aneel Bhusri said they’re starting to get momentum for their software in international markets

“We are particularly pleased with the progress we’ve made in Europe and are beginning to see similar levels of success in the APJ region.  During this past quarter, I personally spent a week in Australia and New Zealand and came away very excited and with a belief that we can be a leading player in that region.”

Workday (WDAY) CEO Aneel Bhusri said they are able to attract better talent now that the startup growth in Silicon Valley has slowed 

“I suspect we’ll continue to hire well, I actually think the hiring environment is pretty attractive right now, the draw for many of the startups in Silicon Valley is not what it was just a year or two years ago.”

Workday (WDAY) CEO Aneel Bhusri stated that the key to cross-selling software to large enterprises is having a relationship with the Chief Information Officer

“On the sales side you know the relationships that the reps have at the CIO level and the CHRO level are really valuable as we sell financials in many cases back into that installed base and frankly the key player in that equation is the CIO, if we’ve got that CIO on our side after a successful HR deployment in many cases that individual actually opens up the door for the finance side and the sales cycle looks very, very similar to the HR sales cycle.”

Workday (WDAY) CEO Aneel Bhusri highlighted his competitors product shortcomings

“That’s a no from a competitive perspective, when we look at the landscape SAP still does not have a cloud offering for financials. Their strategy is S/4HANA, HANA’s a database, HANA does not equal cloud and far as I can tell they don’t have a multitenant true cloud offering what’s even underway for financials, so that’s a big win for us. And from the Oracle perspective, I think they claim Hyperion hosted as cloud. So we just see a lot of run rate, a lot of opportunity and that two comes out in the same cycle.”

Workday (WDAY) CEO Aneel Bhusri believes getting the company to profitability will help mute the volatility in the stock price

“When we saw what was occurring with our HCM product line and the level of profitability we’ve been achieving, we looked at it and said, this is a clear pathway here and frankly I don’t like the gyrations in the stock price when these markets swing wildly and I think frankly profitability is a buffer, I watched how sales versus stock traded when the market was melting down and how our stock traded, and fully there is a premium based on profitability.  And while we’re very focused on the market opportunity and the growth from a shareholder perspective and employee perspective having that level of profitability is important, and the Company that I admire most in the tech world like Amazon and Google and Facebook and Salesforce, it’s a rite of passage, they’ve passed it and it’s the next in our growth and evolution for being a long-term player in this market.”

Workday (WDAY) CEO Aneel Bhusri believes a company’s human resource private data is more important than it’s financial data

“When you sit down with Chief Security Officer at a Fortune 500 company, they’re so-so sensitive on the loss of any employee data. And finance data has a time value to it, it’s valuable for only a short amount of time and in many cases it’s not even, it’s not even that useful in the hands of other people, but people’s self-security numbers and personal information, are things that are near and dear to the hearts of every Chief Security Officer and there’re frankly privacy and security rules again around it. And I think what’s happened in that marketplace is they’ve come to a conclusion, there’s cloud actually far more secure and private than anything that was being done on premise and I think the same thing is happening with finance.”

 

Workday FY 1Q17 Earnings Call Notes

Aneel Bhusri

Increased emphasis on medium sized companies

“Going forward, we plan to put more emphasis on selling and servicing medium-sized companies on the heels of the development of lower-cost deployment technologies that we’ve built for the segment of the marketplace. ”

The hiring market is more attractive now as the draw from startups is not what it was a year or two ago

“We were behind in some pockets but in general I think we’re pretty much caught up and I suspect we’ll continue to hire well, I actually think the hiring environment is pretty attractive right now, the draw for many of the startups in Silicon Valley is not what it was just a year or two years ago.”

Competitors still don’t have a true cloud offering for financials

” when we look at the landscape SAP still does not have a cloud offering for financials. Their strategy is S/4HANA, HANA’s a database, HANA does not equal cloud and far as I can tell they don’t have a multitenant true cloud offering what’s even underway for financials, so that’s a big win for us. And from the oracle perspective, I think they claim Hyperion hosted as cloud. So we just see a lot of run rate, a lot of opportunity and that two comes out in the same cycle.”

Security officers have come to the conclusion that the cloud is far more secure than anything being done on premise

“When you sit down with Chief Security Officer at a Fortune 500 company, they’re so-so sensitive on the loss of any employee data. And finance data has a time value to it, it’s valuable for only a short amount of time and in many cases it’s not even, it’s not even that useful in the hands of other people, but people’s self-security numbers and personal information, are things that are near and dear to the hearts of every Chief Security Officer and there’re frankly privacy and security rules again around it. And I think what’s happened in that marketplace is they’ve come to a conclusion, there’s cloud actually far more secure and private than anything that was being done on premise and I think the same thing is happening with finance.”

Many economies OUS are mid-market economies

” When you look outside the U.S. many of the large economies are frankly mid-market economies, Germany as an example is full of mid-market sized companies.”

In some cases deployments have been too expensive for mid-market companies

“So, this new approach to deployment has paced off hugely across the globally, not just in the U.S. mid-market, so I think it opens up a significant chunk of our market both for HR and financials across the globe. And it’s not like we haven’t been successful there, it just that we tend to be successful with Silicon Valley high growth company that expects to be a large company and they’re willing to pay a little extra for Workday, but if it’s a mid-market company that’s largely going to stay a mid-market company. In some cases the deployments have been too expensive and this addresses that issue. And the other part that we’ve seen with the mid-market is that they do like the platform purchases and that frankly reduces the sales and marketing costs as you can sell the platform them.”

JS Earnings Call Notes 11.23.15 – Total Energy Services, Ross Stores, Workday, & Intuit

Total Energy Services CEO Daniel Haylk said he won’t go after top line growth at the expense of profitability   

“We also seek to strike a strategic balance between equipment utilization and price and we have been continued to declined pursue business opportunities that are not profitable. Simply put we’ll not wear out our equipment for nothing.”

He expects the industry to consolidate in order to earn a respectable rate of return

We strongly believe that the North American energy services industry must consolidate to provide the efficiencies in economies of scale necessary to compete in an increasingly global market. We believe this need for rationalization will become more apparent over the next few quarters. However we’ll remain disciplined in the deployment of the owner’s capital as we continue to look to use our financial capacity and flexibility to pursue opportunities that will provide acceptable risk adjusted returns over the life of the investment.  Our view is things are going to settle out here over the next few quarters, there is going to be a lot of good acquisition and consolidation opportunities we’re going to use the strength of our balance sheet and our abilities to generate substantial cash at low utilizations.”

Total Energy Services CEO Daniel Haylk said his firm doesn’t play accounting games and back out one time expenses

“Unlike many in our industry we do not cargo so called one-time cost related to right-sizing our operations, as we view these costs to be part of the ordinary course of managing our business as well we take no pleasure in highlighting the difficult decisions that must be made during these difficult times that such decisions involve real people with real families.”

And he plans to reduce operating expenses in a challenging environment for energy

“Substantially lower activity levels coupled with excess industry capacity have resulted in a very challenging operating environment that is expected to continue for the foreseeable future. In such an environment we will seek to work with our stakeholders, increase operating efficiencies and reduce our operating costs so is to make the various markets in which we participate competitive from a global perspective.”

While pricing of their services continues to deteriorate

“Price seems horrible and at the end of the day we are seeing competitors work for prices that we simply can’t get to. And we are in a position where we are in business to make money that includes covering depreciation.  And there comes a point where you see park it, and we deliberately parked a bunch of equipment and we are keeping some core activity going to maintain employment for key people, but at the end of the day we are not going to work at a loss.”

Total Energy Services CEO Daniel Haylk said they have been very rational with how they have accounted for their assets on the balance sheet

We are disciplined. And so we’ve – this quarter obviously auditors are interested in the impairment issues. We’ve done a lot of the work that we typically would do at year-end now and we’re very comfortable with the caring values of our asset based and we do not expect to incur any capital asset impairments and again it’s being disciplined and you can argue there are non-cash isn’t that someone pays for it at some point, it also goes to rectificational issues and they were proud of the fact we’ve never return down any of our capital assets, acquisitions good will period and again it requires the intestinal fortitude not to jump on the bandwagon when times are booming.”

And he thinks there could be more pain ahead for other rig operating companies

And I can tell you the pricing that’s going on both in the rentals and the rig side we’ll lead to train wrecks the good thing about the rental and transportation side is those happen fairly quickly and I expect while you are already seeing a few insolvency some public most private that’s going to accelerate.”

Total Energy Services CEO Daniel Haylk reminded investors that he doesn’t give guidance and he wants to remain flexible to adapt to changing market conditions

For the same reason, we don’t give guidance generally, customer intentions are difficult at any time to predict.

And that scale matters in this particular business

“Scale matters, you’re spreading your cost over a larger asset base, you can definitely achieve efficiencies. The flip side is, we’re also seeing market exists in terms of insolvency.  So there is select markets that we compete in both above and below the border, where we’re already seeing the competitive landscape tighten up. And that’s going to continue. Whether we’ve hit bottom or not, I’m not going to give a forecast, but the longer this drags on the more people will go broke and the better of the remaining companies will be coming out of this.”

 

 

 

 

 

Ross Stores (ROST) CFO Michael Hartshorn said the company saw reduced buying costs as they continue to take advantage of opportunities to buy marked down merchandise

“Cost of goods sold was declined 45 basis points driven by a 45 basis points increased in merchandise margins and 5 basis points improvement each in freight and buying cost.  We continue [see] a really strong supply of excess goods in the marketplace.”

Ross Stores (ROST) CEO Barbara Rentler remains cautious regarding near term performance of the company due to the highly promotional nature of competitors 

There is ongoing uncertainty in the macroeconomic environment and, based on the current retail landscape, we expect the upcoming holiday season to be highly promotional.  As a result, while we always hope to do better, we believe it is prudent to maintain a conservative posture.”

Ross Stores (ROST) CFO Michael Hartshorn said they are seeing particular geographic strength in the Midwest

The sales performance was fairly broad-based across regions as we mentioned the Midwest was our strongest region which has been true over the past seven quarters, California our largest region performed in line with the chain and then as far as Texas, Texas was in line with the chain average for the quarter.”

Ross Stores (ROST) CEO Barbara Rentler highlighted the firms flexible buying strategy as a competitive advantage

The buyers have plans, it’s not just free-for-all they have their buying. There is a strategy, there is a plan, there is a plan by business segment of how much we think is appropriate. All that being said one of the benefits for model is that reflect able. So if we were to see a large amount of product and the classification or a business we weren’t planning on particularly driving and that product could help us drive the business, we would put money into that plan and we reflect. So that’s just one of the benefits of being a new up rise business.”

And their consumer skews to the younger side

“In terms of your point about the age we’ve always disproportionately attracted a slightly younger customers and that continues to be true. When you look at the growth of our junior’s business overtime that’s a good manifestation of that, but I would say that demographic for our new customers are pretty similar to the demographics from our existing customers.”    

 

 

 

 

 

Workday (WDAY) Workday CEO Aneel Bhusri says their software products continue to gain momentum with the Fortune 500

Aon and Saint Luke’s join our growing customer list of Financial Management customers that already includes Fortune 500 names such as Unum, Netflix, and J.B. Hunt, as well as large universities such as University of Texas at Austin and Yale.  Demand for our industry-leading Human Capital Management application suite also remains very strong. I’m excited to share that Workday was selected by FedEx, which is now our largest HCM customer. I’m also proud to share that General Mills and Denny’s both selected Workday in Q3.”

And customer satisfaction remains very high

For the past three years, we have earned a 97% customer satisfaction rating and this year that number increased to 98%.  We believe this level of customer satisfaction is far unmatched in ERP software.”

They believe they are taking market share from the legacy software ERP providers

“Another quarter of record revenues, billings and cash flow metrics was driven by strong momentum in financials and accelerating win rates over legacy incumbents.  Another quarter of record revenues, billings and cash flow metrics was driven by strong momentum in financials and accelerating win rates over legacy incumbents.”

And they said that positive customer references are helping drive their win rate

“In terms of competitive dynamics, I think we’ve gotten back to focusing on the technology differentiation. We’ve really pushed customers to do their homework and prospects to do their homework on reference ability.  Neither of our main legacy customers really have much in the way of large referenceable customers and as the customers do their homework, we tend to win the deal.”

Workday (WDAY) Workday CEO Aneel Bhusri says he isn’t impressed with his competitors updated product portfolio 

There were no new moves I think they are running out of new ideas. I didn’t see any moves.  We’re winning all of the large accounts and at the end of the day the models are all based on — all the pricing models are based on employee counts, so we just continue to win both in the mid-market with our mid-market strategy but the large accounts we just dominate and the reason is because we have proof points of getting these large companies into production, one after another. We have another big Fortune 100 company that just went live which we’ll announce in a couple weeks.  It’s about getting value and getting into production and we have that down and our competitors just don’t.”

 

 

 

 

 

 

 

Intuit (INTU) CEO Brad Smith said he is encouraged by the rate of growth in new customers

“We are generating strong new user growth in the online ecosystem. Over 80% of QuickBooks Online customers continue to be new to the Intuit franchise and total QuickBooks paying customer growth was also healthy.”

And they continue to benefit from an acceleration of individuals starting their own companies and the trend of the “gig economy” 

“Roughly 35,000 of our QBO subscribers are using the QuickBooks self employed SKU, which is up from 25,000 last quarter.”

Intuit (INTU) CFO Neil Williams said they maintain a disciplined capital allocation framework and so they won’t invest in anything which doesn’t generate a double digit return over 5 years

We continue to take a disciplined approach to capital management, investing the cash we generate in opportunities that yield an expected return on investment greater than 15% over five years.”

100 million consumers come to TurboTax.com during tax season

“And right now, we’re in the neighborhood of having almost 100 million people in the United States already coming to TurboTax.com. So it’s not about getting even more people to the website, it’s about getting more of that 100 million roughly between the US and Canada to convert into paying customers.”

Intuit (INTU) CEO Brad Smith said he is in favor of tax simplification

We are for tax simplification. We have been from day one, quite frankly, that’s what our business is.  Trying to take a complicated tax code and make it simple for people to comply with, and to be able to get their tax obligations done, and obviously, to get the money back in their pocket if they overpaid.”

Workday FY 1Q16 Earnings Call Notes

Moving from 13k servers to 70k in the next three years

“His estimates were based on utilization of roughly around 5% and with our open stack project and elastic cloud that’s well underway we hope to do quite a bit better than that. No question that the financials involve a lot more or processing, in particular, around the analytics, and the analytics around financials are much higher.”

We displace SAP, PeopleSoft/Oracle, ADP

“we see Payroll as part of the finance organization. We displace the same legacy systems that we do for HR and Finance, SAP, PeopleSoft, Oracle. Probably in the order of PeopleSoft/Oracle then SAP. When you get to the mid market, we displace ADP and in those cases the customers usually bring some Payroll operations back in-house. So it’s really the same cast of characters with the addition of ADP as it is for the HCM world. In terms of opening the door to financials, absolutely it does.”

Seasonality starts to impact businesses more as they grow

“we are seeing a much more seasonality and I think part of it is our presence in the market is becoming stronger and there are just more cycles at the end of the fourth quarter as enterprises spend their budgets and began to formulate projects so they can start them to begin the new year.”

Big partners

“we’ve got several large partners all investing heavily in Workday, Deloitte, Accenture, IBM, Aon Hewitt, Price Waterhouse, KPMG, all the big shots are making big investments in Workday, and beginning to do it outside of North America as well. ‘

Companies are buying HR and finance software from the same vendor in the mid market and we expect that to continue in larger markets

“we’ve definitely seen the trend in the mid market towards buying a platform, buying HR and Finance from the same vendor and we obviously love that trend. I would say when you up market, I would expect that same trend to continue. It’s still relatively early in the days of selling finance large-scale to large-scale companies running in a pure cloud environment. I think if you were to look at the Fortune 500 data or Fortune 1000 data, my guess is with a 135 customers and the number we’ve live, we’re well ahead of our two legacy competitors. But that just tells you it’s still early on. I sure hope and I think the market will drive to suites. There is a natural fit between HR and Finance organizationally and in terms of the data that’s used, especially for non-manufacturing companies, most of the expenses is people related expenses. So if the mid market is any precursor to what’s going to happen in large companies, we definitely see a shift towards buying the full platform.”

Workday 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Winning business in legacy system conversions

“we are really the only vendor that has taken those companies live with a unified solution that includes HR, talent management, benefits all the like in one unified solution and taken them actually live and put them into the production whether it’s an HP or a Flextronics. And I think those data points are a starting point for why those large companies have chosen us. In almost all cases, they are facing an upgrade of a legacy system and you know the math on that. The legacy systems are so expensive to upgrade. They look at different alternatives”

Converting 10-20k person businesses

“We are now very comfortable with a 10,000 to 15,000 person organization going live on financials and the associated volumes. And our pipeline now has companies north of that size 20,000 employees and higher. ‘

Data is really the next step forward

“I think that the cloud has been a transformational platform, but in many ways what you can do with the data is really the next leap forward. I mean, at the end of the day, companies are getting better and better at automating their transaction and processes. These Insight Applications really truly make them run their – or help them run their businesses better. And I think if you look forward 5 years from now, vendors that are in a similar space like Workday will lead with the analytics and lead with these decision-making platforms and the transactional platforms will just be assumed to be there.'”

We can give a CEO data to make important decisions

“when we sit down with an executive – I sat down with a CEO of a large company and he was looking to understand what is a good career path for an entry level person, how best to address turnover? In the old days, we would have said here is a set of tools and you can slice and dice the data any way you would like and figure it out. Now, we can actually tell them with 70% confidence, this career path will lead to a successful employee down the road, this one won’t. We can tell you with – I mean, the confidence levels move around based on the data itself, but we can give them not just ideas of turnover issues, but actually recommendations on how they might solve it. So, I mean, from our perspective this is the future of enterprise computing and so we are going to start leading with it pretty strongly going into next year.”

Workday 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Not sharing customer counts any more

“Due to the increasing size of our business and the diverse mix of very large to medium-sized customers, we decided that we will no longer share specific customer counts on a quarterly basis.”

Unum and BofA are both new customers

“Unum, a Fortune 500 company and leading provider of financial protection benefits throughout the workplace selected Workday for both HR and finance. In the second quarter, we welcomed two more extremely notable Fortune 500 financial services companies. The one we can mention is Bank of America, one of the nation’s leading financial institutions and our new largest customer to date.”

Big systems integrators are building large practices in workday

“I would say 24 months we’ve seen big investments from the large SIs, historically we had small boutique system integrators who’ve been terrific partners from really from day one, be the majority of the implementations. But last few years starting with Deloitte, followed by Accenture, then IBM, now Price Waterhouse, now HP, now CSC, we really have most of the key SIs building out fairly large practices in Workday.”

Getting comfortable moving up market

“I’d characterize where we are today is that we’ve gotten very good at selling to medium size companies. And if you look at our customer list, medium size meaning 3,000, 4,000, 5,000 to 10,000 employees. And where the next push is to go above that size. But very comfortable now with medium size companies and I wouldn’t have said that 12 months ago. We were definitely dealing with smaller companies, but like Netflix going live and Lifetime Fitness with 18,000 employees being life across all of our products, we’re just gaining confidence and continuing to move up market.”

Greenfield is all cloud

“n the world of HR, and the same with whole troupe in the world CRM, the market has flipped. It’s hit a tipping point where, if companies are starting with a Greenfield, they are going to choose cloud versus on premise and for all of the people that are on premise they are increasingly switching to cloud. The functionality is there, the scalability is there, the functionality is now ahead of where the legacy systems sit. And added to that the systems integrators have all over the last couple years gotten much, much better not taking the legacy system out and putting in the cloud system and automating the old processes but actually using Workday or salesforce or any of these cloud solutions to transform the business”

HP and BAC show we can scale up to any size

“HP set a new benchmark in terms of size company that can go live on Workday. So that’s definitely with Bank of America now is HP there’s not really any corporate entity out there that we see that we couldn’t scale to meet their needs.”

95% customer satisfaction

“I also think it’s the customer satisfaction where we’re running at north of 95% customer satisfaction as much as level our sales people are customers are best sales people and they talk with each other.”

A CFO is typically a conservative buyer

“showing a CFO who’s typically a conservative buyer, a new way of running their financial systems, not just a new technology platform. And so, we’re getting better and better at selling to them and marketing to them.”